TEX - Valens Credit Report - 2024 05 23
Cash bond markets are slightly overstating TEX's credit risk with a YTW of 6.259% relative to an Intrinsic YTW of 5.819. Furthermore, Moody's is materially overstating TEX's fundamental credit risk with its speculative Ba3 credit rating five notches below Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. TEX's metrics should generally drive management to focus on all three value drivers: margins, turns, and growth, which could lead to Uniform ROA expansion and increased cash flows available for obligations. In addition, all management members are material owners of TEX equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company. Furthermore, most management members have low change-in-control compensation relative to their average annual compensation, indicating they may not be incentivized to pursue a takeover or accept a buyout of the company, decreasing event risk for creditors.
Earnings Call Forensics™ of the firm's Q1 2024 (04/26/2024) earnings call highlights that management is confident their return on invested capital is up significantly by 370 basis points to 27.6%, and that they are increasing their EPS outlook from $6.85-$7.25 to $6.95-$7.35.
Terex is a global manufacturer of aerial work platforms, materials processing machinery and cranes. The company has two segments: Aerial Work Platforms, which designs, manufactures, services and markets aerial work platform equipment, utility equipment, telehandlers and light towers, including portable material lifts, self-propelled articulating and telescopic booms, scissor lifts, and trailer-mounted light towers as well as, their related components and replacement parts; and Material Processing, which designs, manufactures and markets materials processing and other equipment, including crushers, washing systems, apron feeders, conveyors, and their related components and replacement parts.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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