Why Is Terex (TEX) Up 3.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Terex (TEX). Shares have added about 3.5% 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 the most recent earnings report in order to get a better handle on the important drivers.
Terex Posts Wider-Than-Expected Loss in Q1, Scraps View
Terex reported loss per share of 35 cents in first-quarter 2020, significantly wider than the Zacks Consensus Estimate of a loss per share of 3 cents. The company had reported adjusted earnings per share of 87 cents in the prior-year quarter.
In the reported quarter, production was lower in the company’s global facilities due to bleak customer demand and local government mandates on account of the coronavirus outbreak.
Operational Update
Revenues in the quarter declined 26.5% year over year to $834 million. Moreover, the revenue figure missed the Zacks Consensus Estimate of $854 million.
Cost of goods sold slid 22.4% to $697 million from the prior-year quarter’s $899 million. Gross profit plummeted 42.4% year over year to around $137 million.
Selling, general and administrative expenses flared up 4.3% to $144 million from the prior-year quarter’s $138 million. Terex reported an operating loss of $7.1 million as against the operating profit of $99.7 million witnessed in the year-ago quarter. The company incurred operating margin loss of 0.8% as against margin gain of 8.8% recorded in the prior-year quarter.
Segmental Performance
The Aerial Work Platforms (AWP) segment generated revenues of $512 million in the first quarter, down 29.6% from the year-ago quarter’s $728 million. The segment reported an operating loss of $6 million, as against the operating profit of $59.6 million in the prior-year quarter.
The Material Processing (MP) segment’s revenues totaled $316 million, reflecting a year-over-year decline of around 23%. The segment reported operating income of $25 million, significantly down 58% year over year.
Financial Position
Terex had cash and cash equivalents of $511.3 million as of Mar 31, 2020, compared with $535.1 million as of Dec 31, 2019. In the reported quarter, the company utilized $89 million cash in operating activities compared with the year-ago quarter’s $265 million. Long-term debt was $1,338 million as of Mar 31, 2020, compared with $1,169 million as of Dec 31, 2019. As of Mar 31, 2020, Terex had available liquidity of $945 million.
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. These actions will hurt the company’s cost structure.
Guidance Suspension
On Mar 25, Terex withdrew the current-year financial guidance on account of the uncertainties related to the coronavirus pandemic. Also, the company has not issued any revised guidance. Its operating results will continue to be negatively impacted by the pandemic-related crisis.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -835% due to these changes.
VGM Scores
Currently, Terex has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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