Dow Jones giant Caterpillar (CAT) and fellow S&P 500 construction-related stocks United Rentals (URI), Martin Marietta (MLM) and Vulcan Materials (VMC) fell on concerns that demand has peaked for the current cycle. The culprit? Caterpillar rival Terex (TEX) raised earnings guidance, but not enough for Wall Street.
Late Tuesday, Terex said that Chief Executive John Garrison Jr. will retire at the start of 2024. Simon Meester, current Terex Aerial Work Platforms president, will be the new CEO. Garrison, Terex CEO since 2015, will continue as a consultant for Terex through June 30.
Meanwhile, Terex slightly raised its 2023 EPS view to around $7.05 from about $7 at the end of the second quarter. But that’s below Wall Street’s earnings estimate of $7.16. Terex will release a detailed full-year outlook when it reports third-quarter earnings on Oct. 26.
A Barclays analyst on Wednesday said the Terex guidance suggests order rates could moderate from recent high levels, raising the risk of a book-to-bill ratio falling below 1.0 and broader concerns of peak demand for the cycle. The analyst cut the TEX stock price target to 60 from 66.
On Monday, JPMorgan analyst Tami Zakaria also lowered the firm’s price target on Terex to 63, down from 72. Zakaria lowered machinery estimates across the board for 2024 and is modeling equipment volumes down across agriculture and construction. JPMorgan kept CAT stock, a Dow Jones and S&P 500 component, as one of its top picks for 2024.
Terex stock fell 9.5% to 49.08 during market trade on Wednesday. It dropped to a more than four-month low of 47.50 early Wednesday but bounced off that. Terex stock has a 98 Composite Rating out of a best-possible 99. TEX shares have an 87 Relative Strength Rating and an EPS Rating of 91.
S&P 500 Construction Stocks Fall
The Terex earnings guidance, and fears of broader demand concerns, weighed on other heavy-equipment makers and construction-related stocks.
Caterpillar stock sank 4.9% to 259.2, but came off an intraday low of 258.75, just above the bottom of its flat base. United Rentals shed 5.2%, tumbling from just below the 50-day line. S&P 500 aggregates giants Vulcan Materials and Martin Marietta both lost 5.2%, undercutting their 50-day lines.
Meanwhile, heavy equipment maker Manitowoc (MTW) skidded 7.3% to the lowest point since January.
The broader stock market retreated Wednesday as the 10-year Treasury yield topped 4.9% for the first time since June 2007.
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