We recently compiled a list of the 10 Best Heavy Equipment and Industrial Machinery Stocks to Buy. In this article, we are going to take a look at where Terex Corporation (NYSE:TEX) stands against the other heavy equipment and industrial machinery stocks.
The industrial heavy equipment market includes machinery and tools used in construction, mining, agriculture, and industrial applications. According to 360iResearch, this sector is critically important for infrastructure development, mining operations, and large-scale agricultural productivity.
Growing infrastructural developments, rapid urbanization, and the growth of mining activities are fueling the necessity for heavy equipment. In agriculture, improved machinery efficiency remains critical for meeting global food demands. As per 360iResearch, market growth continues to be influenced by technological advancements like automation, loT integration, and sustainability trends focusing on fuel-efficient and electrically powered machinery.
Growth Drivers for the Heavy Equipment Market
Research Nester believes that the autonomous heavy equipment market was worth more than US$11.43 million in 2024 and should surpass US$26.56 million by 2037. The primary growth driver for the rapid expansion is the strong growth projected in the construction industry. The growth in the building and construction industry is aligned with the demand for heavy equipment.
Market experts opine that growth in the construction industry is expected to stem from lower interest rates in 2025. The types of heavy equipment that are used in the construction industry include earthmoving equipment, and material construction industry, among others.
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Key Trends to Look Out For in 2025
As per Stumble Forward, the industrial machinery landscape has been witnessing a massive transformation. Technological advancements are taking place at a rapid pace, with manufacturers adopting cutting-edge tools and processes to beat the competition. Increased automation and robotics, Al integration, green manufacturing, and 3D printing for customization are the key trends likely to drive growth for the industrial machinery industry in 2025.
Automation in industrial machinery tends to reduce the chances of human error and supports streamlining production. Robots, together with machine learning, are being employed to inspect, assemble, and even pack goods. Stumble Forward went on to add that Al-powered systems can predict equipment failures, reducing unexpected costly repairs. This predictive maintenance technology should continue to help industries save thousands of dollars in repair costs.
In 2025, industrial machinery is expected to be designed in a way that will promote sustainability. Energy-efficient machines, including those running on renewable energy, or producing less waste, will be adopted. Finally, the adoption of 3D printing in industrial machinery, which can help produce parts that are lightweight yet incredibly strong, is expected to grow as manufacturers continue to realize its importance. Stumble Forward also added that the ability to print intricate designs should result in innovation, enabling engineers to test prototypes and adjust accordingly.
Our Methodology
To list the 10 Best Heavy Equipment and Industrial Machinery Stocks to Buy, we used a screener and sifted through online rankings. After getting a list of 25-30 stocks, we filtered out the ones having high hedge fund holdings. Finally, the stocks are arranged in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of heavy construction machinery in operation on a job site.
Terex Corporation (NYSE:TEX)
Number of Hedge Fund Holders: 34
Terex Corporation (NYSE:TEX) manufactures and sells aerial work platforms and materials processing machinery worldwide. The company operates in 2 segments – Materials Processing (MP) and Aerial Work Platforms (AWP).
Wall Street opines that Terex Corporation (NYSE:TEX)’s growth is expected to be driven by its recent acquisition of ESG. ESG is financially accretive from day one. It should add ~$40 million in EBITDA in Q4 2024 for the period following the October 8 close. Terex Corporation (NYSE:TEX) expects to deliver at least $25 million in operational run-rate synergies by the end of 2026 and realize additional commercial opportunities as the company integrates ESG into Terex.
Terex Corporation (NYSE:TEX) increased the size and scope of its addressable markets by acquiring ESG in the broader waste and recycling industry. These are non-cyclical markets that have resilient growth trajectories. The company believes that ESG will drive increased revenue growth, free cash flow, EBITDA margin, and earnings per share accretion. The transaction will be double-digit percentage adjusted EPS accretive in 2025, with meaningful growth thereafter.
While ESG’s efficient operating model with low net working capital will drive a meaningful improvement in free cash flow accretion, its EBITDA margin including run-rate synergies is expected to add 140 basis points of margin accretion. Also, ESG’s product offerings, like Heil® refuse collection vehicles and Marathon® recycling equipment, provide Terex Corporation (NYSE:TEX) with a steady revenue stream from sectors less affected by cyclical construction markets.
Overall TEX ranks 3rd on our list of the best heavy equipment and industrial machinery stocks to buy. While we acknowledge the potential of TEX as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than TEX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.