We came across a bullish thesis on Terex Corporation (TEX) on Substack by Value Don’t Lie. In this article, we will summarize the bulls’ thesis on TEX. Terex Corporation (TEX)’s share was trading at $45.52 as of Feb 14th. TEX’s trailing and forward P/E were 9.18 and 9.40 respectively according to Yahoo Finance.
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Terex is a leading industrial equipment manufacturer serving electric utility, mining, construction, and waste management industries, operating under three segments: Materials Processing (MP), Aerial Work Platforms (AWP), and Environmental Solutions Group (ESG). The MP segment provides equipment such as crushers, screens, conveyors, and wood processors, while AWP offers aerial work platforms, utility equipment, and telehandlers. ESG, acquired in September 2024 from Dover for $2 billion at an 11.5x EBITDA multiple, manufactures garbage trucks, compactors, and waste management solutions. The acquisition aligns with Terex’s strategy to diversify its business away from highly cyclical capital goods into a higher-margin, less capital-intensive segment, as ESG benefits from strong organic growth, robust aftermarket sales, and a digital services component. However, this expansion was fully debt-financed, increasing leverage to 3.3x EBITDA, creating near-term pressure on capital allocation.
Terex’s MP and AWP segments are in a cyclical downturn following a period of supernormal demand from 2021-2023. These businesses are heavily tied to customer capital expenditures, and backlogs are now normalizing to pre-pandemic levels. 2025 guidance reflects a double-digit revenue decline for AWP and a high single-digit decline for MP, suggesting a possible cyclical trough. In 2018-2019, AWP and MP earned $196-300 million and $211-228 million in segment income, respectively, before spiking to $371 million and $359 million in 2023, then declining to $342 million and $252 million in 2024. This correction aligns with historical trends, but the ESG acquisition provides a stabilizing factor, adding a higher-margin business with recurring revenue.
Terex guided for $5.3-5.5 billion in revenue, $660 million EBITDA, $4.70-5.10 EPS, and $300-350 million in free cash flow (FCF) for 2025. The stock trades at 9.4x earnings and FCF, well below its historical median of 11.2x, with earnings depressed from the $7/share peak in 2023. While leverage is a concern, Terex is expected to prioritize debt reduction, which could lead to multiple expansion once balance sheet concerns ease. Assuming a cyclical recovery in 2026, analysts project $740 million EBITDA and $5.76 EPS, implying a valuation of $63-66 per share, compared to $46 today. While the upside is not massive, industrial cyclicals often overshoot during recoveries, making Terex an attractive investment at a trough multiple with the ESG segment providing structural support.
Terex Corporation (TEX) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held TEX at the end of the third quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of TEX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an 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 was originally published at Insider Monkey.