TEX – Traded CDS 237bps, Base Case iCDS 152bps, Negative Case 352bps, 2029 5.000% Bond YTW of 7.596%, iYTW of 6.386%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
October 24, 2023
- Credit markets are overstating TEX’s credit risk with a YTW of 7.596% relative to an Intrinsic YTW of 6.386%, and a CDS of 237bps relative to an Intrinsic CDS of 152bps. Furthermore, Moody’s is materially overstating TEX’s fundamental credit risk with its highly speculative Ba3 credit rating five notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. TEX’s metrics should generally drive management to focus on all three value drivers: margins expansion, asset efficiency, and revenue growth. Moreover, all members of management 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 firm.
- Earnings Call Forensics™ of the firm’s Q2 2023 (08/02/2023) earnings call highlights that management generated an excitement marker when saying they have seen better sales volume in their AWP segment. Additionally, they are confident the products they sell will allow them to battle Chinese competitors all over the world and be on an equal playing field that they can win. Lastly, management is confident manufacturing efficiencies offset increasing costs, leading to AWP’s improved margins.
