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Why Is Terex (TEX) Up 22.6% Since Last Earnings Report?

·4 min read

It has been about a month since the last earnings report for Terex (TEX). Shares have added about 22.6% in that time frame, outperforming 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 catalysts.

Terex Q4 Earnings & Revenues Down Y/Y

Terex’s fourth-quarter 2020 adjusted earnings per share slumped 42% year over year to 21 cents. The Zacks Consensus Estimate for the quarter was break even earnings per share.

Including one-time items, the company had reported earnings per share of 26 cents in fourth-quarter 2019. There were no such items in fourth-quarter 2020.

Operational Update

Revenues in the fourth quarter declined 11% year over year to $787 million. However, the top line beat the Zacks Consensus Estimate of $755 million. The company, however, witnessed an improvement of 18% in bookings and rise of 25% in backlog on a year-over-year basis.

Cost of goods sold went down 11% year over year to $638 million. Gross profit fell 11.7% year over year to $149 million. Selling, general and administrative expenses was $118 million in the quarter under review compared with an adjusted figure of $133 million in the prior-year quarter. Terex reported an operating profit of $31.6 million, reflecting a decline of 13% from the year-ago quarter’s adjusted figure of $36.3 million. Operating margin came in at 4.0%, flat compared with the year-earlier quarter.

Adjusted EBITDA in the fourth quarter of 2020 was $43.5 million compared with $46.1 million in fourth-quarter 2019. Adjusted EBITDA margin was 5.5% in the quarter under review compared with 5.2% the year-ago quarter.

Segmental Performance

The Aerial Work Platforms segment generated revenues of $412 million in the fourth quarter, down 18% from the year-ago quarter. The segment reported an operating loss of $2 million compared with the prior-year quarter’s profit of $4.4 million.

The Material Processing segment’s revenues totaled $366 million, reflecting a year-over-year decline of 3%. The segment reported an operating income of $55 million, up 22% year over year aided by strong operational performance despite lower revenues.

Financial Position

Terex had cash and cash equivalents of $665 million as of Dec 31, 2020, compared with $535 million as of Dec 31, 2019. The company generated $225 million of cash from operating activities in 2020 compared with the $173 million last year. Long-term debt was $1,166 million as of Dec 31, 2020, compared with $1,169 million as of Dec 31, 2019.

Terex’s board of directors has reinstated its quarterly dividend for 2021. The quarterly dividend of 12 cents per share will be paid on Mar 19, 2021 to all shareholders of record as of the close of business on Mar 5, 2021.

2020 Results

Terex’s adjusted earnings per share in 2020 was 13 cents, a significant drop from the prior-year’s figure of $3.25. However, the bottom line compared favorably with the Zacks Consensus Estimate of a loss of 9 cents per share. Including one-time items, the company delivered earnings per share of 13 cents in 2020 compared with $2.92 in 2019.

Sales plunged 29% year over year to $3.08 billion from the prior-year figure of $4.35 billion. The top line beat the Zacks Consensus Estimate of $3.05 billion.

Guidance

Terex expects improving customer sentiment to drive customer demand for its products and services. The company expects sales to be around $3.45 billion in 2021, which indicates year-over-year growth of 12%. Earnings per share is expected to be in the range of $1.95 to $2.35 for the ongoing year, which suggests a substantial improvement from earnings of 13 cents reported in 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 1357.81% 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 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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