Terex (TEX -0.52%) stock tumbled 10.3% through 9:50 a.m. ET on Wednesday morning after the manufacturer of aerial work platforms and telehandlers announced that its CEO, John Garrison, will retire from the company on Jan. 1, 2024.
Adding to investor worries, Terex issued new guidance that, while better than the previous guidance, was still not as great as what Wall Street was predicting.
What's going on at Terex?
Let's start with the CEO news. Garrison is out, and Simon Meester, currently Terex's president of aerial work platforms, is in as the new CEO effective New Year's Day 2024.
This isn't necessarily bad news for the stock. Although Terex has certainly prospered under Garrison's leadership (the stock is up 63% over the last 52 weeks), and he will be missed for that, a lot of Terex's growth seems due to the efforts of Garrison's replacement. Terex sales so far this year are up nearly 27% in comparison to last year's first half, but Terex's aerial work platforms revenue is up 31.5% -- and profits in this division are up 175% year over year.
On the other hand, the news on guidance isn't great. According to The Fly, analysts were looking for Terex to report earnings per share of $7.16 this year. In the course of reassuring investors about the leadership change, however, Terex mentioned that its own guidance is for only about $7.05 per share, slightly short of expectations.
Is Terex stock a buy before earnings?
Terex may have more color on that number in its upcoming third-quarter earnings report, due out Oct. 27. For the time being, however, what we know is that Terex's new guidance is a nickel higher than the $7 per share it had previously predicted for this year -- but $0.16 less than what Wall Street is looking for.
In other words, Terex is going to "miss earnings" next week, and that's rarely good news for shareholders stuck owning the stock when it happens. That being said, even $7.05 in earnings on a $49 stock implies that right now, Terex shares are selling for a low, low 7 times trailing earnings right now. That hardly seems expensive, even if analysts are correct that this year might be kind of the high-water mark for this cyclical stock, and that earnings will more or less flatline over the next few years.
If you're an investor looking to get into a high-quality stock with modest debt, a 1.3% dividend yield, and an attractive valuation -- and you can afford to be patient for a few years, waiting for growth to resume -- then I think Terex stock just might be an excellent choice.
