Morgan Stanley is taking another look at a 93-year-old equipment company that is trying to appear less like an old-line machinery stock.The company is Terex (TEX), the industrial equipment maker whose roots go back to the founding of the Euclid Company in 1933.Morgan Stanley reiterated its Overweight rating on Terex after an investor group visit to the company’s headquarters, maintaining an $84 price target and noting that its $112 bull case is becoming more realistic, according to a Morgan Stanley note shared with TheStreet.Terex shares were trading at $68.46 around midday July 2, the day after Morgan Stanley’s report was released, below Morgan Stanley’s base-case target and well below its bull-case scenario. The stock traded between $67.50 and $70.36 during the session.Morgan Stanley sees a different TerexMorgan Stanley’s call shows a confident view of Terex’s ongoing transformation. The firm’s analysts visited Terex headquarters and met with CEO Simon Meester, CFO Jennifer Kong-Picarello, Michael Irving, president of Specialty Vehicles, and other executives.The old concern around Terex was that it was a cyclical industrial business with execution problems and uneven investor confidence. However, Morgan Stanley’s analysts wrote that Terex is undergoing more than just a portfolio transformation, suggesting the company is repositioning itself around specialty vehicles, operational execution, and steadier earnings growth.Related: Terex Stock on a Roll as Heavy-Equipment Maker Crushes Earnings EstimatesMorgan Stanley’s official price target is still $84, about 23% above where Terex was trading midday July 2. But the firm said the target may prove conservative if Terex continues to improve its business mix and execution.The more optimistic case is $112 a share, a scenario that depends on investors valuing Terex more like a focused specialty-equipment company than a traditional cyclical machinery stock.Numbers behind the Terex callSeveral numbers explain why Morgan Stanley is taking a more constructive view:$84: Morgan Stanley’s base-case price target$112: Morgan Stanley’s bull case$72.39: Terex’s June 30 closing price cited in the Morgan Stanley report$68.46: Terex’s midday Thursday price, according to Yahoo Finance$7.1 billion: Terex’s first-quarter backlog109%: Terex’s first-quarter book-to-bill ratio$436 million: Specialty Vehicles first-quarter net sales20%: Specialty Vehicles pro forma sales growthMore than $100 million: Chicago Fire Department emergency-vehicle orderSpecialty vehicles move to the centerTerex’s transformation became clearer earlier this year when the company completed its merger with REV Group, creating a larger specialty equipment manufacturer.The merger brought more exposure to emergency vehicles, waste collection, utilities, recreational vehicles, and other specialty equipment categories. Terex said the combined company is expected to generate $75 million in annual cost savings and other merger benefits by 2028.The shift helps explain Morgan Stanley’s view. Morgan Stanley said demand for Specialty Vehicles remains robust, supported by replacement demand and competitive advantages in Terex’s product portfolio.A recent Chicago Fire Department order shows what that demand looks like in practice. The department selected E-ONE and Wheeled Coach to supply 120 new emergency vehicles valued at more than $100 million, including 42 pumpers, 38 aerial ladder trucks, and 40 ambulances. E-ONE and Wheeled Coach are part of Terex’s Specialty Vehicles business.Morgan Stanley mentioned the self-help efforts inside Terex, including throughput, efficiency, and standardization. The firm also estimated that Terex’s investment in robotics company Apptronik may be worth $250 million to $300 million, though it remains a secondary part of the broader Terex story.
Terex is an industrial machinery manufacturer.Daniel Sztork / Getty Images
For investors, the Terex story now depends on whether specialty-vehicle demand and better execution can turn a long-running machinery name into a higher-quality equipment stock.That means the next move will be whether the company can keep demand strong, turn backlog into sales, and prove that its operational changes can support steadier earnings growth.Related: BofA sees more power behind Caterpillar shares