The Zacks Analyst Blog Highlights: Boeing, Terex, Caterpillar, Deere & Co. and Komatsu
CHICAGO, Dec. 12, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Boeing Co. (NYSE:BA-Free Report), Terex Corp. (NYSE:TEX-Free Report), Caterpillar Inc. (NYSE:CAT-Free Report), Deere & Company (NYSE:DE-Free Report) and Komatsu Ltd. (OTC:KMTUY-Free Report).
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Here are highlights from Wednesday's Analyst Blog:
Boeing Updates on 2014 Delivery Financing
The world's largest aircraft manufacturer, The Boeing Co. (NYSE:BA-Free Report), in its seventh annual aircraft finance market forecast, predicts $112 billion worth of passenger jet deliveries in 2014 (up 7.7% year over year) across the aviation industry. This implies a staggering level of funding due to come from investors and financiers.
The plane maker projects that capital markets will provide 22% of financing for new aircraft deliveries next year, up from 14% in 2013 and just 3% in 2009. The company is extremely bullish on its Super Hornet and Growler production. Of the $112 billion in jet sales projected for next year, Boeing believes as much as 95% will be shared between Boeing and Airbus.
The sector's diminishing reliance on export credit agencies ("ECA"), which will finance only 18% of 2014 sales (down from 23% in 2013) and the speedy development of commercial aircraft-backed bond issuances are the contributory factors to financing realignment.
Boeing also expects banks to offer 25% of 2014 financing, compared with 28% in 2013. Again, Chinese banks will likely rule, overtaking Japanese banks, as they are the second-largest providers of bank debt at 23%, following the European banks at 25%. Hence, commercial banks are expected to play a pivotal role and act as the largest source of funding in 2014.
Boeing, with a robust backlog and growing deliveries, remains well on-track despite the many technical glitches plaguing the much-hyped Dreamliner. The gradual recovery in the global economy is bringing in a steady improvement in passenger and freight traffic. As per the International Air Transport Association (IATA), global airline passengers will touch the 3.6 billion mark in 2016, expanding 5.3% per annum in the period 2012 to 2016.
After dominating the Dubai Air Show with orders worth $101.5 billion, Boeing looks to be in an advantageous position when compared to archrival Airbus. It has $95 billion worth of orders and commitments for its new 400-seat 777x. With the assurance of first 777x deliveries by 2020, the company is now intent on quickly selecting the production site.
Boeing had requested bids from a number of states in November with a deadline set for mid December. Officials in Alabama, California, Missouri, South Carolina, Texas and Utah are among those who are wooing Boeing with economic incentive packages worth millions of dollars. A win for the Boeing plant would mean the creation of thousands of jobs for that state.
Terex to Sell Truck Biz to Volvo for $160M
Terex Corp.'s (NYSE:TEX-Free Report) shares had gained 2.46% following the announcement on Monday that the company will sell its truck business. The decision to offload this unit is part of Terex's efforts to transform to become a lifting and material handling solutions company. The truck business that manufactures and sells off-highway rigid and articulated haul trucks, never fitted into the transformational plan. The truck business will be sold at $160 million to Volvo Construction Equipment.
Construction Segment
The sale, subject to regulatory approvals and customary closing conditions, is slated to be completed in the first half of 2014. The truck business has been part of Terex for more than 30 years. The highway rigid and articulated haul trucks come under "Heavy Construction Equipment", which is a part of Terex's Construction segment. On a product basis, Heavy Construction Equipment amounted to 9% of Terex's total sales in 2012 and was pitted against market leaders such as Caterpillar Inc. (NYSE:CAT-Free Report), Deere & Company (NYSE:DE-Free Report), Komatsu Ltd. (OTC:KMTUY-Free Report), Doosan, Liebherr and Volvo.
In addition to heavy construction equipment, the Construction segment designs and manufactures road building equipment, landfill compactors, as well as their related components and replacement parts. The performance of the Construction business remains challenged. Sales in the segment declined 24% year over year in the first nine months of 2013 as demand for its products remained weak, particularly in Europe and China. Reduced demand for large trucks, material handlers and aftermarket parts were the primary factors that negatively impacted net sales in the current year period.
Truck Business: A Misfit
Over the past several years, Terex has transformed from predominantly a mining and construction equipment company to a more diverse portfolio that serves numerous end markets. Sales to customers in the construction and mining industries, which contributed 80% of its revenues in 2008 accounted for approximately 50% of revenues in 2012. The company is now planning to become a lifting and material handling solutions company. Thus, the truck business was no longer considered a good fit in the portfolio of lifting and material handling businesses.
The divestiture is also in line with Terex's focus on streamlining its construction business by selling certain underperforming product lines during the year. The company remains on track with internal cost reduction initiatives in the Material Handling & Port Solutions and Crane businesses. The divestiture of the truck businesses and its focus on reducing overhead and within the Construction segment are expected to aid results going ahead. This divestiture will enable Terex to focus on cranes, aerial lifts and telehandlers as it continues to shift its focus from mining and earthmoving.
Westport, Conn.-based Terex is a global equipment manufacturer, catering to the construction, infrastructure, and surface mining industries. The company's manufacturing facilities are located in the U.S., Canada, Europe, Australia, Asia and South America. Terex currently has a Zacks Rank #3 (Hold).
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