Terex recently
reported fourth quarter and annual earnings, both of which were significantly
better than the year-ago periods, though the improvement was due in part to
easy comparisons. More importantly,
management forecasted 2013 earnings of $2.40-2.70, and published their internal
"goal" of reaching $5 in EPS by 2015, but insisted that this wasn't
"guidance." The CEO, in the
past a bit of a shop-a-holic, promised to move towards the goal by focusing on
operational improvements, not through acquisitions. In addition, the company is aiming for a 15%
return on invested capital in 2015.
Just as important
as the P&L is the balance sheet, which has been strengthened considerably
over the past few years, and the company pledged further improvements in the
years to come. Indeed, the 2015 EPS goal
appears to assume little or no remaining debt (management forecasted operating
income in 2015 of $1 billion, and assuming a 35% tax rate and 120 million
shares outstanding, EPS would amount to around $5.40, leaving little room for
interest payments).
The $5 goal is a
bit light, so Terex shareholders must be hoping that management is under-promising
with the intention of over-delivering.
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