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Terex (TEX) to Report Q4 Earnings: What's in the Cards?

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Terex Corporation (TEX - Free Report) is likely to beat on earnings in its to-be-reported fourth-quarter 2018. The company also seems poised to deliver year-over-year improvement in both its top line.
 
In the last reported quarter, the company’s adjusted earnings per share rose 36% year over year while revenues improved 11%. However the company missed the Zacks Consensus Estimate on both counts. Barring the last quarter, Terex has surpassed the Zacks Consensus Estimate in three of the four trailing quarters, recording average positive surprise of 20.1%.
 
Let’s see how things are shaping up prior to this announcement.

Terex Corporation Price and EPS Surprise
 
Our proven model shows that Terex is likely to beat on earnings this quarter, courtesy of a perfect combination of the following two key ingredients:
 
Earnings ESP: Terex has an Earnings ESP of +3.17%, representing the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. While the Most Accurate Estimate is at 47 cents, the Zacks Consensus Estimate is pegged lower at 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: Terex carries a Zacks Rank #3 (Hold). Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 alongside a positive ESP have significantly higher chances of beating estimates. Thus, the above combination raises the odds of a likely earnings surprise for this stock.
 
Conversely, sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
 
Factors at Play
 
Terex’s Aerial Work Platforms (“AWP”) segment, which generated approximately 52% of third-quarter 2018 revenues, will gain from strong global markets, operational execution and innovative new products. The segment is in the early point of the growth cycle, both in North America and Western Europe. China and other developing markets are still in the early phase of adopting products. Macroeconomic fundamentals and customers feedback all hint toward a multi-year growth period for the segment. The Zacks Consensus Estimate for the segment sales is currently pegged at $499 million for the fourth quarter of 2018 that reflects year-over-year growth of 11%. The segment is expected to report an operating income of $36 million, a year-over-year increase of 19%. 
 
With strong markets and a significantly higher backlog than last year, the Material Processing segment is well poised for improved results in the to-be-reported quarter. Further, rising global demand for crushing and screening equipment stemming from economic growth, construction activity and aggregate consumption bodes well. The segment is likely to grow on the back of continued improvement in its Fuchs material handlers and broad line of environmental products in global markets. The Zacks Consensus Estimate for sales for the quarter to be reported is at $326 million, reflecting projected growth of 15% from the $283 million reported in the year-ago quarter. The estimate for the segment’s operating income is at $38.7 million, an improvement of 9% from fourth-quarter 2017.
 
The Cranes segment, that contributed 24% of third-quarter 2018 revenues, will improve driven by fairly stable global cranes markets. Currently, oil prices are driving demand in North America and the Middle East. Sales of Demag all-terrain cranes continue to improve on a global basis aided by successful new product introductions. The Utilities business remains a consistent performer in a relatively stable market environment and the tower crane business continues to perform well. The Zacks Consensus Estimate for the segment’s sales for the December-end quarter is $343 million, reflecting year-over-year improvement of 6%. However, supply-chain challenges and raw material inflation are likely to dent segment income in the quarter. Owing to the abovementioned factors, the Zacks Consensus Estimate for the segment’s income is at $0.1 million, a plunge of 93% from the prior year.
 
For the seventh quarter in a row, Terex’s backlog grew year over year in every segment on the third quarter 2018. Its total segment backlog surged 41% year over year in the to-be-reported quarter. Consequently, improving backlog, along with an enhanced global market and environment positions the company well for 2018. The Zacks Consensus Estimate for total sales of $1.2 billion for the December-end quarter indicates an increase of 13% from the prior-year quarter. However, input cost inflation, unfavorable currency headwinds and abovementioned issues in the Crane segment will somewhat dent margins. Nevertheless, the Zacks Consensus Estimate for Terex’s earnings per share is pegged at 46 cents for fourth-quarter 2018, a projected surge of 39% from the prior-year quarter. 
 
Share Price Performance
 
 
Shares of the company have lost 28% compared with the 17% decline recorded by the industry.
 
Stocks to Consider
 
Here are some companies in the Zacks Industrial Products sector that you may want to consider as they have the right combination of elements to post an earnings beat this quarter, according to our model.
 
HD Supply Holdings, Inc. (HDS - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Graphic Packaging Holding Company (GPK - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank #3.
 
Plug Power, Inc. (PLUG - Free Report) has an Earnings ESP of +23.91% and a Zacks Rank #3.
 
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