Bucyrus' Acquisition of Terex's Mining Business Makes It the Largest Player in Mining Equipment

Risk

The largest risk Bucyrus faces is its dependence on highly
cyclical commodity prices, as drops in commodity values
can cause demand for new equipment to evaporate. In
addition, the company's top five customers account for a
significant portion of overall sales--cutbacks by these
customers could materially hurt Bucyrus' top line. The
expensive and long-lived nature of the company's products
could also pressure earnings during downturns, as
customers may nix plans to order new machinery in order
to conserve cash.

Bulls Say

Bucyrus' acquisition of DBT and recent Terex purchase
not only expand its product portfolio, but also its global
footprint. Bucyrus' strategy to increase exposure to international
markets could help partially offset future declines from
a mature U.S. coal market. A sizable installed base of machinery should help spur
aftermarket parts and services sales, as well as support
overall performance during cyclical downturns.

Bears Say

Demand for Bucyrus' products is reliant on volatile
commodity pricing, a factor it can't control.
China presents an attractive growth opportunity, but it's
likely Bucyrus will face stiff competition from domestic
players. Bucyrus has significant customer concentration--its top
five customers in both its surface and underground
equipment businesses make up around 40% of each
segment's revenue.(MORNINGSTAR RESEARCH)

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