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Why Is Terex (TEX) Up 11% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Terex Corporation TEX. Shares have added about 11% in that time frame.

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

Terex Beats on Q1 Earnings & Sales, Lifts '18 EPS View

Terex’s first-quarter 2018 adjusted earnings came in at 55 cents per share, a substantial improvement from 5 cents per share in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of 37 cents per share by a wide margin of 49%. Improvements in operating activities and capital structure, as well as development in global markets resulted in the stellar earnings performance.

Including one-time items, Terex posted earnings per share of 62 cents in the quarter, against a loss of 4 cents reported in the year-ago quarter.

Revenues in the reported quarter were up 25% year over year to $1,261 million from $1,007 million recorded in the prior-year quarter. Also, the reported figure surpassed the Zacks Consensus Estimate of $1,116 million.

Operational Update

Cost of goods sold increased 21% to $1,030 million from $855 million in the prior-year quarter. Gross profit surged around 52% year over year to $231 million. Gross margin expanded 320 basis points (bps) to 18.3%.

Selling, general and administrative expenses were up 1.7% year over year to $160 million. Terex reported an operating income of $71.3 million against a loss of $4.7 million posted in the year-ago quarter.

Segment Performance

The Aerial Work Platforms (AWP) segment posted revenues of $639 million in the quarter, up 35% from $472 million in the prior-year quarter. Operating income improved to $60 million from $22 million in the year-ago quarter.

Revenues from the Cranes segment increased 19% to $314 million from $264 million recorded in the year-earlier quarter. The segment reported an operating loss of $9.7 million, narrower than the loss of $31.9 million posted in the comparable quarter last year.

The Material Processing (MP) segment’s revenues came in at $303 million, up 21.8% year over year. The segment recorded an operating income of $39 million, up 52% year over year.

Financial Position

Terex reported cash and cash equivalents of $448 million at the end of the first quarter, down from $627 million recorded at the end of 2017. The company used $44.4 million of cash in operating activities during the quarter compared with cash usage of $164.6 million posted in the prior-year period. Its long-term debt was $1,083 million as of Mar 31, 2018, compared with $985 million as of Dec 31, 2017.

During the first quarter, Terex repurchased approximately five million shares for $205 million through its previously-announced buyback program.

Outlook

Terex raised its full-year 2018 adjusted EPS guidance to $2.70-$3.00 from $2.35-$2.65, reflecting remarkable year-over-year growth of 85%. This upbeat outlook is backed by strong first-quarter results and capital market actions, and operational improvements over the balance of 2018.

Notably, Terex expects revenue growth and operating margin improvement in every business segment in 2018. It will continue to implement the Simplify and Execute to Win strategy. The company witnessed benefits from commercial excellence and expects to realize gain from strategic sourcing in the second half of 2018. Moreover, focus on disciplined capital-allocation strategy and backlog strength will stoke the company’s growth.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been four revisions higher for the current quarter compared to four lower.

Terex Corporation Price and Consensus

 

Terex Corporation Price and Consensus | Terex Corporation Quote

VGM Scores

At this time, TEX has an average Growth Score of C and a grade with the same score on the momentum front. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

TEX has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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