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Terex (TEX) Down 11.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Terex (TEX - Free Report) . Shares have lost about 11.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Terex due for a breakout? 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 catalysts.

Terex Earnings and Revenues Surpass Estimates in Q4

Terex’s fourth-quarter 2018 adjusted earnings per share surged 55% year over year to 51 cents, beating the Zacks Consensus Estimate of 46 cents.

Including one-time items, Terex posted loss from continuing operations of 42 cents per share in the quarter compared with a loss of 38 cents witnessed a year ago.

Operational Update

Revenues in the Dec-end quarter improved 16% year over year to $1.23 billion, beating the Zacks Consensus Estimate of $1.20 billion. Cost of goods sold increased 17% to $1,009.3 million from $859.6 million in the prior-year quarter. Gross profit rose 9% year over year to $223.8 million.

Selling, general and administrative expenses rose 8.6% year over year to $177.1 million. Terex reported an operating income of $47 million compared with $41 million in the year-ago quarter, indicating 14% growth. Operating margin remained flat at 4%.

Segment Performance

The AWP segment reported revenues of $535.5 million in the fourth quarter, up 19.2% from $449.4 million in the prior-year quarter. Operating income declined 12.8% to $26.4 million from $30.3 million in the prior-year quarter.

Revenues in the Crane segment increased 12.4% to $364.5 million from the year-ago quarter. The segment reported an operating loss of $9.2 million against a profit of $2.7 million in the prior-year quarter.

The MP segment revenues totaled $339.5 million, reflecting an increase of 20% year over year. The segment reported an operating income of $47.7 million, up 34%.
 
Financial Position

Terex had cash and cash equivalents of $368 million at the end of 2018 compared with $626.5 million at the end of 2017. Net cash provided by operating activities was $94.2 million in 2018 compared with $153 million in 2017. Long-term debt was $1,214.7 million as of Dec 31, 2018, compared with $979.6 million as of Dec 31, 2017.

2018 Results

Terex reported adjusted earnings per share of $2.71 in 2018, up 101% from $1.35 in the prior year. Earnings beat the Zacks Consensus Estimate of $2.66. Including one-time items, the company reported earnings per share of $1.45 compared with the prior year’s 63 cents.

Sales increased 17.4% year over year to $5.13 billion in 2018. The top line beat the Zacks Consensus Estimate of $5.10 billion. In 2018, backlog was up 19%.

2019 Guidance

Terex expects earnings per share at $3.60-$4.20 in 2019.  It expects net sales of around $4.7 billion for the year. The company will focus on a disciplined capital-allocation strategy. Moreover, the sale of the Demag Mobile Crane business and the exit from the mobile crane product lines will likely improve Terex’s operating results.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12% due to these changes.

VGM Scores

At this time, Terex has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Terex 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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