Terex is Monday's IBD Stock Of The Day as the maker of materials-processing and aerial work equipment joins a rally in cyclical stocks, helped by rising odds of a soft landing for the U.S. economy. The suddenly cooler wage growth on display in Friday's December jobs report may allow the Fed to stop hiking interest rates sooner than expected.
That's great news for Terex and IBD's Machinery-Constructing/Mining industry group, which has climbed into the stock market's top tier over the past several months. Machinery stocks are poised to benefit from a surge in infrastructure, mining and industrial spending in the U.S. that's just ramping up. If the economy can avoid a significant downturn that dents nonresidential construction, stocks like Terex and Caterpillar could go on a run.
In a Dec. 13 investor-day presentation, Terex said that recent infrastructure, clean energy and chip manufacturing legislation could fuel upward of $2.5 trillion in spending over a decade.
"Tremendous physical spend in the United States coming up over the next 3 to 5 years" should provide a good tailwind, Terex CEO John Garrison said at the event.
Terex Stock
Terex stock climbed 1.8% to 44.31 in Monday afternoon stock market action. That followed Friday's 3.1% gain, which lifted Terex back above its 50-day moving average.
When a leading stock bounces above its 50-day line with conviction, that can signal institutional buying. A move above the 50-day counts as a follow-on buy signal — a good place for existing shareholders to add to current holdings — when the market trend is favorable, as it is now.
Rebounds off the 50-day are not normally good places to open a new position. TEX stocks action over the past two sessions also breaks a six-week downtrend, a move aggressive investors might used as a buy signal.
Investors looking to open a new position in Terex could sight in on a buy point of 46.57. TEX stock has been carving out the flat base since mid-November.
Be sure to read IBD's daily The Big Picture column to stay on top of the market trend and what it means for you trading decisions.
On Monday, CAT stock, a member of the IBD Leaderboard portfolio of elite stocks, slipped 0.6%. On Friday, CAT stock had surged 3.6% to a record high.
Terex Goes On Offense
Terex gets 44% of revenue from its materials-processing machinery, but 60% of operating profit, Garrison said. The rest comes from its aerial work platforms business. The unit provides equipment for construction and maintenance of utility and telecommunications lines and a wide range of infrastructure projects.
Terex is targeting at least $6 billion in sales in 2027, or 7% growth per year. The company aims to grow operating margins from 9.5% in 2022 to a range of 13%-14%. The sales numbers don't include potential M&A, which has become a new avenue for growth since 2021.
On Dec. 13, Baird analyst Mircea Dobre boosted his price target for Terex to 46 from 37. He said Terex targets appear achievable, if the economy cooperates. Dobre noted that Terex has focused its business in recent years, divesting underperforming assets, and now is in a position to go on offense via acquisitions.
