PACCAR (NASDAQ: PCAR) and Terex Corporation (NYSE:TEX) are both mid-cap auto/tires/trucks companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, profitability, valuation, analyst recommendations, dividends, earnings and institutional ownership.

Valuation & Earnings

This table compares PACCAR and Terex Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
PACCAR $17.26 billion 1.30 $2.36 billion $3.74 17.11
Terex Corporation $4.22 billion 0.80 $152.10 million ($0.63) -60.10

PACCAR has higher revenue and earnings than Terex Corporation. Terex Corporation is trading at a lower price-to-earnings ratio than PACCAR, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

62.7% of PACCAR shares are held by institutional investors. Comparatively, 99.3% of Terex Corporation shares are held by institutional investors. 2.6% of PACCAR shares are held by company insiders. Comparatively, 2.5% of Terex Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares PACCAR and Terex Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PACCAR 7.77% 18.61% 6.23%
Terex Corporation -1.76% 4.98% 1.79%

Risk and Volatility

PACCAR has a beta of 1.14, indicating that its share price is 14% more volatile than the S&P 500. Comparatively, Terex Corporation has a beta of 1.85, indicating that its share price is 85% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for PACCAR and Terex Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PACCAR 1 8 9 0 2.44
Terex Corporation 3 6 6 0 2.20

PACCAR presently has a consensus target price of $71.87, suggesting a potential upside of 12.27%. Terex Corporation has a consensus target price of $36.15, suggesting a potential downside of 4.51%. Given PACCAR’s stronger consensus rating and higher possible upside, analysts plainly believe PACCAR is more favorable than Terex Corporation.

Dividends

PACCAR pays an annual dividend of $1.00 per share and has a dividend yield of 1.6%. Terex Corporation pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. PACCAR pays out 26.7% of its earnings in the form of a dividend. Terex Corporation pays out -50.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. PACCAR has raised its dividend for 3 consecutive years. PACCAR is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

PACCAR beats Terex Corporation on 13 of the 16 factors compared between the two stocks.

PACCAR Company Profile

PACCAR Inc (PACCAR) is a technology company. The Company’s segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures engines, primarily for use in the Company’s trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands, and Ponta Grossa, Brazil. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, Middle East and South America.

Terex Corporation Company Profile

Terex Corporation is a manufacturer of lifting and material processing products and services that deliver lifecycle solutions. The Company has three business segments: Aerial Work Platforms (AWP), Cranes and Materials Processing (MP). It delivers lifecycle solutions to a range of industries, including the construction, infrastructure, manufacturing, shipping, utility, quarrying and mining industries. The AWP segment designs, manufactures, services and markets aerial work platform equipment, telehandlers and light towers. The AWP segment’s products are used by its customers to construct and maintain industrial, commercial and residential buildings and facilities, and for other commercial operations, as well as in a range of infrastructure projects. The Cranes segment’s products are used by its customers for construction and manufacturing facilities, among others. The MP segment’s products are used by its customers in construction, infrastructure and recycling projects.

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