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Terex (TEX) Down 27.9% 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 27.9% 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 Misses on Q2 Earnings & Revenues, Lowers Guidance

Terex reported second-quarter 2019 adjusted earnings per share of $1.21 missing the Zacks Consensus Estimate of $1.34 by a margin of 10%. The bottom line also declined 8% from the prior-year quarter.

Including one-time items, Terex reported earnings of $1.14 per share in the quarter compared with year-ago figure of $1.10.
 
Operational Update

Revenues in the quarter rose 4% year over year to $1.307 billion, lagging the Zacks Consensus Estimate of $1.317 billion. Cost of goods sold improved 6% to $1,035 million from $974 million in the prior-year quarter. Gross profit fell 2% year over year to $271.8 million.

Selling, general and administrative expenses remained flat at $146 million. Terex reported an operating income of $126 million compared with $132 million in the year-ago quarter, reflecting year-over-year decline of 5%.

Segment Performance

The Aerial Work Platforms (AWP) segment reported revenues of $870 million in the second quarter, up 2.1% from $852 million in the prior-year quarter. Operating income declined 23% to $8 million from the prior-year quarter.

The Material Processing (MP) segment’s revenues totaled $346 million, reflecting year-over-year improvement of around 9%. The segment reported operating income of $56 million, up 27% year over year.

Financial Position
 

Terex had cash and cash equivalents of $368 million at the end of second quarter of 2019, compared with $340 million at 2018-end. The company utilized $48.3 million of cash in operating activities in the six-month period ended Jun 30, 2019 compared with cash inflow of $35.6 million in the comparable prior year period. Long-term debt was $1,341.7 million as of Jun 30, 2019, compared with $1,210.6 million as of Dec 31, 2018.

Terex remains on track for the completion of the sale of Demag Mobile Cranes which is expected to result in cash proceeds of approximately $125 million.

2019 Guidance Trimmed

The company expects the AWP segment’s performance in the second half of 2019 to be in line with the comparable period last year. The segment’s sales in fiscal 2019 are expected to be flat to an increase of 1% from the prior fiscal. The company had earlier projected sales growth at 3-6%. Operating margins is guided at 9-9.5%, down from the prior 10.5-11.5%.

Terex increased sales growth expectation to 4-7% for the MP segment in 2019. The company had earlier expected sale growth at 2. Operating margin guidance is at 14-14.5%, up from the 13.0-13.5% guidance provided earlier.

Terex now projects earnings per share for fiscal 2019 at $3.40-$3.80 on net sales of approximately $4.6 billion. Operating margin for the year is projected at 8.8-9.3%. Terex had earlier expected earnings per share to be in the upper half of its guidance range of $3.60 to $4.20 and net sales of around $4.7 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -19.32% due to these changes.

VGM Scores

Currently, Terex has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Terex has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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