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Terex shares creamed yesterday

Terex, one of Caterpillar’s smaller competitors in the mining and construction equipment space, took such a royal pummeling yesterday that I figure it’s worth mentioning even if it makes me look like a slacker for not blogging the news as it happened (you get what you pay for in the blogging business).

The real news started after the bell Wednesday, when the company reported a huge loss and said it expected mass layoffs. It got worse yesterday when an analyst noted the company is in danger of violating a covenant on debt due in April. Terex lost a third of its value in the space of 24 hours (though it was up a few percentage points this morning).

You have to wonder what Terex investors were thinking up until the day before yesterday. Cat shares were off by a third from their December high to their February low; it’s hard to imagine TEX avoiding a similar fate.

Terex’s earnings report sounds eerily familiar:

Ron DeFeo, Terex Chairman and Chief Executive Officer, stated, “This past year has been like no other – the first half of the year exhibited robust growth and expansion, while the second half of the year was severely impacted by the global credit crisis and economic deterioration, which drove significant declines in customer demand in our businesses. For the full year, net sales increased significantly in our Cranes and Mining businesses, but were offset by the results in our Aerial Work Platforms, Construction, and Materials Processing businesses, which experienced considerable weakness in the second half of the year. Excluding the goodwill impairment charges, our net income for the year was good given the economic environment. Although we are disappointed with our current working capital levels, we have taken aggressive actions to adjust our production to meet reduced customer demand. We maintained a strong cash position and ended the year with a solid balance sheet and sufficient liquidity to execute our key business plans.”

Mr. DeFeo continued, “Given the current market conditions, it is difficult to project 2009 performance with a reasonable degree of certainty. However, we are planning for continued softness in demand. We are experiencing increasing levels of cancellations in our backlog for crane and mining products, as well as delays in acceptance of deliveries, as our customers in these areas are not immune to the effects of the global economic downturn. Based on what we know today, we expect our net sales for 2009 to decline by 30% to 35% from 2008. The translation effect of foreign currency exchange rate changes is expected to contribute approximately 13% of this decline. Given the uncertainty and volatility in today’s environment, we are not providing earnings guidance until we have better visibility; however, we will continue to take aggressive actions to reduce operating costs and improve our cash flow.”

Ah, that old “lack of earnings guidance” bugaboo: it’ll bite you every time.

Perhaps TEX investors did not expect the company to take a $460 million Q4 loss for “goodwill impairments in the Construction, Roadbuilding and Utility Products businesses, where the recorded value of those assets exceeded their fair value due to lower projected results for these businesses resulting from adverse market conditions.” Goodwill losses don’t affect cash flow much, though lowered asset values would mean less collateral to borrow against.

More on TEX at Finviz.

Looking ahead, Deere’s in the headlights next week:


WASHINGTON — Commerce Department releases housing starts for January, 8:30 a.m.; Federal Reserve releases industrial production for January, 9:15 a.m.; the Federal Open Market Committee releases minutes from meeting held in January, 2 p.m.

NEW YORK — CBS Corp. reports fourth-quarter financial results.

PHILADELPHIA — Comcast Corp. reports fourth-quarter financial results.

MOLINE, Ill. — Deere & Co. reports first-quarter financial results.

AKRON, Ohio — Goodyear Tire & Rubber Co. reports fourth-quarter financial results.

PALO ALTO, Calif. — Hewlett-Packard Co. reports first-quarter financial results.

AUSTIN, Texas — Whole Foods Market Inc. reports first-quarter financial results.

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Tom Mangan posted at 10:05 am February 13th, 2009 |

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