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Wednesday, July 20, 2011

The King Returns (NYSE: TEX)

NEW YORK - The market was expecting a big quarter from the "king" or colloquially referred as the T-rex after the dinosaur Tyrannosaurus Rex for its dominance of the industry, reported their results today after the close. The company announced net income of 1 cent a share or $0.9 million. The company recorded an after tax gain of $26 million on Bucyrus shares and incurred $33 million to $33 million relating to the restructuring of its crane segment. The company also incurred $3 million of costs in relation to its acquisition of Demag cranes. The company announced it has acquired over 80% of the company's shares in its tender offer from early May to purchase the company.

Revenue jumped 37.8% to $1,488.2 from $1079.9.

CEO of Terex or referred to as the King, Ronald DeFeo said "there is still significant work in front of us, We had strong performance in terms of order and sales activity in the second quarter but supplier constraints on component deliveries and other operational challenges."

The company's struggled crane segment put a large drag on results. The company would have been much more profitable without this segment, but it does expect the company will have a $70 million annualized benefit from its restructuring of the crane segment going into 2012.

These problems are seen in other crane manufacturers. Manitowoc and Columbus McKinnon have struggled to be profitable. Manitowoc has seen its sales slide in that segment but managed to make approximately $2 million of profit in the last quarter on its crane segment alone which is comparable to Terex. Manitowoc was the 4th largest crane manufacturer in 2008 but Terex had over $100 million more in crane sales in their first quarter. Manitowoc reports next week. Columbus McKinnon Corp the third largest U.S. manufacturer after Terex and Manitowoc showed after tax income from cranes of approximately $6 million in Q1 but the company has been mired in losses in previous quarters.

Terex is different from the other businesses with cranes only contributing 30% to revenue compared to 50% for Manitowoc and 100% for Columbus McKinnon.

The slow operating results in this segment are mitigated in Terex by its strong operating income in its other businesses and its stronger liquidity position than its creditors.

Aerial Work platforms saw revenue increase 108% and operating profit rose to $28.2 million from a $2 million loss in the year ago quarter.

Construction revenue increased 30% and had a loss of $7 million compared to a loss of $17 million in the year before quarter. Operating results included one time items for missed shipments due to delays with suppliers and $2 million of litigation costs that were settled from a previous quarter.

Materials Processing saw sales rise by 40% and saw operating profit rise a little over 100% to $21 million from $9 million.

Terex's tangible equity improved to $1.65 billion from $1.6 and its current ratio is over 2.5 to 1. This compares to Manitowoc which has -1.6 billion of tangible equity and a current ratio of 1.2 to 1.

Terex stock is un-traded in after hours as investors digest the news relating to the company. Investors are often flummoxed when there is supreme revenue growth vs lagging profitability. However they can take solace in the strong profitability seen in their divisions outside cranes division. It can also take solace in the strong liquidity seen throughout the company as compared to other manufacturers.

2 comments:

  1. Terex remains a great value. I'm glad to see the latest earnings report bear that out.

    ReplyDelete
  2. Ya, I would buy Terex here. The earnings were only disappointing if you focus on the near-term. I used to own U.S. Steel and was consistently disappointed but they were losing hundreds of millions of dollars but had revenue growth.

    Terex is breaking even has excellent liquidity and is moving towards greater profitability.

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