Why Terex Shares Tumbled
Jun 17th 2013 4:38PM
Updated Jun 17th 2013 5:20PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Terex were collapsing today, falling as much as 16% after cutting its forecast for the quarter and full year.
So what: The construction-equipment maker appears to be falling in line with the industry, which is facing a lower demand across the market as the weak global economy has forced a delay in larger projects. Terex now says it expects earnings of just $0.50 to $0.60 a share, well below the analyst consensus at $0.82. In particular, management blamed weakness in the construction and material handling and port solutions segments. For 2013, it reduced EPS guidance to $1.90-$2.10 from a former range of $2.40-$2.70.
Now what: Like others in its industry, Terex said North American sales have improved but the European market continues to be a problem. While a drop in share prices seems warranted after such an announcement, there seems to be no long-term concerns here. Industry leaders like Caterpillar have made similar predictions, and it's fair to expect a recovery as the European economy gets better. Shareholders may have to wait longer than they wanted, but Terex and its peers should eventually bounce back.
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