A month has gone by since the last earnings report for Terex (TEX). Shares have added about 0.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Terex Beats on Q2 Earnings & Revenues, Raises '18 View
Terex Corporation's second-quarter 2018 adjusted earnings surged 92% year over year to 98 cents per share. Earnings also beat the Zacks Consensus Estimate of 90 cents per share by a margin of 9%. Broad-based improvements in Terex's global markets, operational improvements as well as benefits from its disciplined capital allocation strategy led to the overall improved performance in the reported quarter.
Including one-time items, Terex posted earnings of 73 cents per share in the quarter compared with 98 cents reported in the year-ago quarter.
Operational Update
Revenues in the quarter improved 19% year over year to $1,403 million from $1,182 million recorded in the prior-year quarter. Revenues beat the Zacks Consensus Estimate of $1,397 million. Backlog rose by 31% in the quarter, aided by growth in all segments.
Cost of goods sold increased 19% to $1,123 million from $941 million in the prior-year quarter. Gross profit surged 16% year over year to $279 million. However, gross margin contracted 50 basis points (bps) to 19.9%.
Selling, general and administrative expenses increased 8% year over year to $176 million. Terex reported an operating income of $103 million compared with $78 million in the year-ago quarter, a rise of 33%. Operating margin expanded 80 bps to 7.4%.
Segment Performance
The Aerial Work Platforms ("AWP") segment reported revenues of $751 million in the quarter, up 27% from $593 million in the prior-year quarter. Operating income improved 67% to $102 million from $61 million in the prior-year quarter.
Revenues from the Crane segment were up 10% to $3359 million from $304 million recorded in the year-ago quarter. The segment reported an operating loss of $12 million, in contrast with the operating income of $15 million in the prior-year quarter.
The Material Processing ("MP") segment's revenues were $319 million, up 14% year over year. The segment reported an operating income of $42 million, up 19% year over year.
Financial Position
Terex had cash and cash equivalents of $374 million at the end of second-quarter 2018 compared with $627 million at the end of 2017. The company generated $35.6 million of cash in operations in the six-month period ended Jun 30, 2018 compared with cash outflow of $123 million in the prior-year comparable period. Long-term debt was $1,089 million as of Jun 30, 2018, compared with $980 million as of Dec 31, 2017.
During the reported quarter, Terex repurchased 2.9 million shares for $116 million. The company recently announced a new $300 million share repurchase authorization.
2018 Guidance Raised
Backed by its year-to-date results, capital market actions and upbeat guidance for the back half of the year, Terex raised full-year adjusted EPS guidance to $2.80-$3.00 from the previous guidance of $2.70-$3.00.
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 -6.47% 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 a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
