Terex (TEX) Poised To Move Higher; Perhaps An Acquisition Target?

Barron's wrote a positive column on Terex (NYSE: TEX) in this past weekend's paper. It said investors are eying Terex, after the stock has fallen from its high of $96 in July. Terex has fallen to the mid-50s as investors sell global-infrastructure plays. Investors are worried that a slowing U.S. economy will dampen demand for aerial work platforms, which account for half of Terex's profits.

Barron's said Terex trades at a discount to most construction-related companies. "Terex is absurdly cheap versus its peers," says Robert Marcin, who runs Defiance Asset Management, a Conshohocken, Pa., investment firm that holds the stock. Marcin maintains that Terex could hit 80 to 85 in the next 12 months, and that it might become a takeover target for a foreign company like Volvo Group, seeking to beef up its construction-equipment business.

Barron's said this: "Terex is valued at only 5 times projected 2008 pretax cash flow, a measure commonly used in corporate deals. Some transactions, like Ingersoll-Rand's sale last year of its Bobcat and other construction-related businesses, were done at more than 10 times annual cash flow. Downside risk seems limited, given its low valuation relative to sales and profits. The company is valued at about 65% of estimated 2007 sales, versus one to two times sales for most of its peers."

Terex says it has no plans to sell, but willing to consider any serious offer. "This company is for sale every day. I'm totally in this for shareholders," DeFeo says.

DeFeo has set an ambitious goal called "12 by 12" in 2010, meaning $12 billion in sales and a 12% operating margin.

Terex could hit 80 in a year. If TEX becomes a takeover candidate, a winning bid might reach $100 a share.

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