Friday, Credit Suisse upgraded Terex Corp. (TEX) shares to Outperform from Neutral and increased its price target to $31 from $16.
Analyst Cook believes Terex offers the most long-term potential upside in his coverage universe as the highest beta play on an global economic recovery. And while the next few quarters will be challenging, the analyst believes TEX remains extremely compelling on a risk/reward basis.
The analyst said that recall that at the peak in 2007, TEX earned $6.00 on $9.8 billion in sales. Even if one assumes TEX can earn only half of what they did in the previous cycle, TEX is a compelling buy.
The analyst noted that Aerial Work Platform biz, ~20% of revenues, offers the most significant earnings upside and has likely bottomed. The analyst believes rental houses will likely start spending towards the end of 2010. This is key as AWPs are a significant driver of EPS. Trough margins were north of 17% and the biz is currently running in the red.
The analyst added that TEX has meaningful exposure to commodities, >25% of revenues, and emerging markets, 23% of sales. Data points from our channel checks suggest mining could start moving ahead albeit at a more muted pace. Furthermore, the recovery in emerging markets likely revives large infrastructure projects. This could provide upside to Mining and a less draconian scenario for Cranes.
Currently, TEX is up $0.07 or 0.36% and trading at $19.43.
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