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STOCKCALL: DEERE, TEREX MACHINERY STOCKS GET DEMAND BOOST
Source: StockCall.com news release

Machinery industry has been one of the biggest beneficiaries of recent occurrences in the general economy. A recent Commerce Department report showed increased demand for industrial goods. Machinery manufacturers also received a positive surprise in the form of increased write-off limits. Under a new legislation, companies are now allowed to write-off up to $500,000 in new asset purchases. This will help the machinery manufacturers in optimizing their tax liability.

New regulations about the farm subsidies are expected to have an impact on the performance of agriculture equipment companies like Deere & Co. (NYSE: DE), while Terex Corp. (NYSE: TEX) benefits from improvement in construction activities. StockCall has initiated an in-depth technical review on Deere and Terex.

Deere to Capture Foreign Markets

Deere & Co. is betting on improvement in the farming sector. The company expects its agricultural equipment revenue to increase by 4 percent. Deere is scheduled to report its earnings on February 11 th. The company generally provides conservative estimates and over delivers. Deere is expected to report its EPS at $1.39 per share.

With the improvement in farming sector, the stock is anticipated to perform well this year. However, it has seen quite a run-up in the past six months and at the current price point, it looks to be fairly priced. Since the company has strong fundamentals, any pullback from current levels will provide an interesting opportunity to initiate a position in the stock.

Deere is also banking on international expansion. The company seeks to obtain 50 percent of its revenue from overseas markets by year 2018. Deere has invested heavily in China and Brazil and has set up manufacturing bases in these countries. Deere is also planning to increase its focus on the construction business.

Terex on the Bull Run

Terex Corp. stock had been hitting new 52-week highs lately. The company has seen its margins improved and the impact is clearly visible on its stock price. Better margins have also helped the company to neutralize the effect of stagnant sales. Terex lacks the scales of Caterpillar and Deere but it is steadily matching up to their margins.

The company commands a market capitalization of $3.65 billion, Caterpillar and Deere sports $63 billion and $36 billion in market cap respectively. Due to its smaller size, Terex has its unique set of issues operating in a capital intensive industry. The stock trades at Price/Earnings ratio of 27, making it an expensive stock to own, whereas Caterpillar sports single digit P/E ratio of 9.9.

Terex recently revamped its top management and the changes are likely to push it in a new direction. Its stock is also gaining insider's favor as its Senior Vice President, Douglas Friesen recently snapped up a bunch of shares at the average price of $29.44.

Insider purchases are generally considered a good omen for a company. Terex is expected to reap benefits of recent uptick in non-residential construction work around the globe. The company has boosted its top-line and bottom-line considerably in the previous financial year and the trend is likely to continue. However, the company is maintaining conservative stance and expect the activities to pick up meaningfully during the latter half of this year.

About StockCall.com

StockCall.com is a financial website where investors can have easy, precise and comprehensive research and opinions on stocks making the headlines.


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