S&P Lifts Rating on Terex (TEX) to 'BB'; Outlook Stable
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Price: $60.71 -2.19%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 1.4%
Revenue Growth %: +2.5%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 1.4%
Revenue Growth %: +2.5%
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Standard & Poor's Ratings Services today raised its ratings on U.S.-based lifting and material handling solutions provider Terex Corp. (NYSE: TEX) by one notch, including the corporate credit rating to 'BB' from 'BB-'. The outlook is stable.
The upgrade reflects improvements in Terex's credit measures and prospects for the company to generate meaningful free operating cash flow of more than $200 million on an annual basis. We expect Terex to maintain reasonably low leverage (less than 2.5x net debt to EBITDA on a reported basis) in good market conditions, which we consider consistent with an "aggressive" financial risk profile given the high volatility of its end markets.
Over the past several years, Terex has reshaped its portfolio to reduce exposure to weaker performing niches of the construction market, and to expand its presence into material handling and port solutions markets. We expect these shifts will reduce the future volatility of operating results and should allow the company to improve its profitability. We view Terex as having a business risk profile at the better end of our "fair" assessment category. The combination of our view of the business risk profile and improved credit measures leads to a "positive" comparable rating analysis, which supports the 'BB' corporate credit rating.
Terex manufactures a broad range of equipment related to material handling, lifting, and construction markets. Our "fair" business risk profile reflects the company's solid positions in certain niche markets (such as its No. 2 position in the aerial work platform market) that are competitive and can be subject to cyclical risks, its good geographic and product diversity, and decent scale and scope of operations. Despite improvements since the last downturn and a rebalancing of the portfolio of businesses, we still believe Terex is at risk of significant profitability volatility.
The upgrade reflects improvements in Terex's credit measures and prospects for the company to generate meaningful free operating cash flow of more than $200 million on an annual basis. We expect Terex to maintain reasonably low leverage (less than 2.5x net debt to EBITDA on a reported basis) in good market conditions, which we consider consistent with an "aggressive" financial risk profile given the high volatility of its end markets.
Over the past several years, Terex has reshaped its portfolio to reduce exposure to weaker performing niches of the construction market, and to expand its presence into material handling and port solutions markets. We expect these shifts will reduce the future volatility of operating results and should allow the company to improve its profitability. We view Terex as having a business risk profile at the better end of our "fair" assessment category. The combination of our view of the business risk profile and improved credit measures leads to a "positive" comparable rating analysis, which supports the 'BB' corporate credit rating.
Terex manufactures a broad range of equipment related to material handling, lifting, and construction markets. Our "fair" business risk profile reflects the company's solid positions in certain niche markets (such as its No. 2 position in the aerial work platform market) that are competitive and can be subject to cyclical risks, its good geographic and product diversity, and decent scale and scope of operations. Despite improvements since the last downturn and a rebalancing of the portfolio of businesses, we still believe Terex is at risk of significant profitability volatility.
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