Equipment maker Terex (NYSE: TEX) is all charged-up. Its shares are up 38% year-to-date, after a huge jump Tuesday and its last quarter which was a smash hit. But is it free from weaknesses? No company is perfect, and only a detailed scrutiny can give us a clearer picture. Let's take a look at where Terex stands.

Strengths

  • Diversified portfolio: Terex's equipment is used in a broad range of industries from construction to mining. Seeking further diversification, the company recently acquired Europe-based Demag Cranes to make a mark in port equipment business, which is likely to add good value to Terex's business line.  
  • Management efficiency: Terex's gross and operating margins have consistently moved upward in the past few quarters, which indicates management efficiency. Gross margin, for instance, climbed to 18.2% in the first quarter from 13.3% in the comparable period last year. The company's top line has grown at an impressive 49% over the past 12 months.
  • Global presence: Terex derives more than a quarter of its revenue from the rapidly growing emerging markets, and is looking at strengthening its global footprint. Its recent joint venture with China Sinomach Heavy Industry and acquisition of Demag Cranes are proof. Demag has presence in five continents and 16 countries, including the high-potential markets of China and India.

Weaknesses

  • European woes: Europe is one of Terex's main markets, accounting for 29% of its top line in the last 12 months. Trouble in the region has even compelled the company to cut down on some operations.
  • High debt: Terex sports a fairly high total-debt-to-equity ratio of 115%. Negative unlevered free cash flow and interest coverage of 1.5 times aren't too comforting. The company needs to continuously boost margins and cash flow to maintain manageable levels of debt.

Opportunities

  • Pick up in the U.S. market: An uptick in U.S. construction activity will be a big boost for Terex. Signs of a recovery are already visible. A major chunk of sales for Terex as well as peer Caterpillar (NYSE: CAT) came from North America during their respective first quarters. Both these companies are optimistic about the U.S. markets for the rest of the year.
  • Emerging-market potential: Terex's global expansions appear to be on the right track, as higher construction and mining activity, particularly in the emerging markets, means huge opportunities, which is why most industry players are eyeing these markets closely.

Threats

  • Constant threat: Competition is stiff. While Caterpillar is leaving no stone unturned in becoming the leader in China, Manitowoc is set to become the first player to launch rough-terrain cranes in Brazil. Terex thus needs to get aggressive to maintain and increase market share.
  • Spotty eurozone: A deepening crisis in the region could hit Terex's top and bottom lines hard.
  • Slowdown fears: Countries like China and Brazil have exhibited signs of slowdown recently. Cat has lowered its 2012 guidance for both markets. If the slowdown persists, it will be bad news for Terex.

The Foolish bottom line
A rising top line and some cost cutting should help Terex improve margins and shareholder returns. A strong business line and solid expansionary moves make it worth a watch. Click here to add Terex to your personalized stock watchlist.   

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