Please ensure Javascript is enabled for purposes of website accessibility

Don't Let Heavy Machinery Weigh You Down

By Christopher Barker – Updated Apr 6, 2017 at 3:03AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Seeking heavy-equipment manufacturers that are light on their feet.

First came the whiskers, followed by a furry little face that didn't look very threatening. But now, investors are being whipped by a destructive tail.

Yes, Fools, the cat is now fully out of the bag. Global industry simply fell off a cliff sometime last fall, and the more plant closures and layoffs we see, the more this once-bagged cat resembles a rabid, ferocious lion. After Terex (NYSE:TEX) became the latest heavy-equipment manufacturer to reduce guidance this week, the time is ripe to reassess the landscape for these machinery makers.

Back in September 2008, before the feline had extended its claws, Terex reduced 2008 earnings guidance to less than $6.65 per share and watched investors crush the stock. This week, Terex reduced guidance yet again, this time to a range of $5.40 to $5.45 per share, but the shares traded resiliently in the aftermath. The difference, I believe, is all about sentiment, which suggests that markets have already priced in a barrage of earnings disappointments. With a final growl, Terex even warned of a potential $600 million impairment charge relating to tumbling asset valuations, and still, shares refused to head lower.

Elsewhere in the sector, investors are licking their wounds after Caterpillar (NYSE:CAT) dumped dismal earnings and deep labor cuts upon them. CNH Global (NYSE:CNH) set the mood by forecasting huge sales declines and announcing plant closures to work through burgeoning inventories. Manitowoc (NYSE:MTW) posted a fourth-quarter loss last week despite some one-time gains from the divestiture of its marine segment. Meanwhile, mining-equipment specialist Joy Global (NASDAQ:JOYG) notably bucked the trend, with a 68% increase in net earnings for the fiscal fourth quarter and a still-expanding backlog of equipment orders.

As we await earnings from both Bucyrus (NASDAQ:BUCY) and Deere (NYSE:DE) in mid-February, Fools with an interest in the sector have time to review balance sheets and operational outlooks. With stimulus packages under consideration around the world, and indications that some portion of demand disruption is related to credit and liquidity issues, I believe several of these companies will find themselves on the road to recovery by 2010. Now that the cat is out of the bag with respect to a massive global recession and the frightful derailment of the worldwide industrial machine, I believe that a recovery process can soon begin for the heavy industrials with the lightest debt burdens.

Further Foolishness:

Members of the Motley Fool CAPS community have awarded Terex with the highest possible rating of five stars, with nearly 1,300 members expecting the company to outperform the S&P 500. CAPS members are eager to know your thoughts on this company and on your favorite picks, so join the free community today.

Fool contributor Christopher Barker hasn't seen to many crane-filled skylines lately. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Fool owns shares of Terex. The Fool has a grown-up, high-capacity disclosure policy that played with toy tractors in the sandbox when it was but a wee lad.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Caterpillar Inc. Stock Quote
Caterpillar Inc.
$164.08 (-1.10%) $-1.82
Deere & Company Stock Quote
Deere & Company
$333.89 (-2.08%) $-7.11
Terex Corporation Stock Quote
Terex Corporation
$29.74 (-0.30%) $0.09
Joy Global Inc. Stock Quote
Joy Global Inc.
The Manitowoc Company, Inc. Stock Quote
The Manitowoc Company, Inc.
$7.75 (-3.00%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.