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Terex (TEX) Up 2.6% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Terex (TEX). Shares have added about 2.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Terex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Terex Posts Narrower-Than-Expected Loss in Q2

Terex reported loss per share of 5 cents in second-quarter 2020, significantly narrower than the Zacks Consensus Estimate of a loss per share of 56 cents. The company had reported adjusted earnings per share of $1.21 in the prior-year quarter.

Operational Update

Revenues in the quarter declined 47.1% year over year to $691 million. However, the revenue figure beat the Zacks Consensus Estimate of $630 million.

Cost of goods sold plunged 43.7% year over year to $583 million. Gross profit plummeted 60.7% year over year to around $107 million.

Selling, general and administrative expenses dropped 31.7% year on year to $99.7 million in the June-end quarter. Terex reported an operating profit of $7.4 million compared with the year-ago quarter’s $126 million. Operating margin came in at 1.07% compared with the 9.6% witnessed in the year-earlier period.

Segmental Performance

The Aerial Work Platforms (AWP) segment generated revenues of $414 million in the second quarter, significantly down 52.4% from the year-ago quarter. The segment reported an operating loss of $5 million, as against the operating profit of $86.3 million recorded in the prior-year quarter.

The Material Processing (MP) segment’s revenues totaled $264 million, reflecting a year-over-year decline of 38.7%. The segment reported operating income of $23.4 million, significantly down 64.2% year over year.

Financial Position

Terex had cash and cash equivalents of $426 million as of Jun 30, 2020, compared with $535 million as of Dec 31, 2019. The company generated $12.3 million cash in operating activities in the first half of the current year compared with cash utilization of $48.3 million in the first half of 2019. Long-term debt was $1,167 million as of Jun 30, 2020, compared with $1,169 million as of Dec 31, 2019. At the end of the April-June quarter, Terex had available liquidity of $1 billion.

Additionally, the company undertook significant cost-reduction actions, including suspending dividends and share repurchases, reducing team-member compensation, and making temporary furloughs and permanent layoffs of team members.

Guidance

Terex anticipates sales in the second half of the ongoing year to be similar to the first half of the year, thanks to the current market conditions. Its operating results will be negatively impacted further by the pandemic-related crisis. Terex is focused on aligning its production plans in response to lower customer demand. The company will continue to focus on managing its cost and working capital.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 105.47% due to these changes.

VGM Scores

At this time, Terex has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Terex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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