Terex (TEX) Beats On Q1 Earnings & Sales, Lifts '18 EPS View

Terex Corporation’s (NYSE:TEX) first-quarter 2018 adjusted earnings came in at 55 cents per share, a substantial improvement from 5 cents per share in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of 37 cents per share by a wide margin of 49%. Improvements in operating activities and capital structure, as well as development in global markets resulted in the stellar earnings performance.

Including one-time items, Terex posted earnings per share of 62 cents in the quarter, against a loss of 4 cents reported in the year-ago quarter.

Revenues in the reported quarter were up 25% year over year to $1,261 million from $1,007 million recorded in the prior-year quarter. Also, the reported figure surpassed the Zacks Consensus Estimate of $1,116 million.

Operational Update

Cost of goods sold increased 21% to $1,030 million from $855 million in the prior-year quarter. Gross profit surged around 52% year over year to $231 million. Gross margin expanded 320 basis points (bps) to 18.3%.

Selling, general and administrative expenses were up 1.7% year over year to $160 million. Terex reported an operating income of $71.3 million against a loss of $4.7 million posted in the year-ago quarter.

Segment Performance

The Aerial Work Platforms (AWP) segment posted revenues of $639 million in the quarter, up 35% from $472 million in the prior-year quarter. Operating income improved to $60 million from $22 million in the year-ago quarter.

Revenues from the Crane segment increased 19% to $314 million from $264 million recorded in the year-earlier quarter. The segment reported an operating loss of $9.7 million, narrower than the loss of $31.9 million posted in the comparable quarter last year.

The Material Processing (MP) segment’s revenues came in at $303 million, up 21.8% year over year. The segment recorded an operating income of $39 million, up 52% year over year.

Financial Position

Terex reported cash and cash equivalents of $448 million at the end of the first quarter, down from $627 million recorded at the end of 2017. The company used $44.4 million of cash in operating activities during the quarter compared with cash usage of $164.6 million posted in the prior-year period. Its long-term debt was $1,083 million as of Mar 31, 2018, compared with $985 million as of Dec 31, 2017.

During the first quarter, Terex repurchased approximately five million shares for $205 million through its previously-announced buyback program.

Outlook

Terex raised its full-year 2018 adjusted EPS guidance to $2.70-$3.00 from $2.35-$2.65, reflecting remarkable year-over-year growth of 85%. This upbeat outlook is backed by strong first-quarter results and capital market actions, and operational improvements over the balance of 2018.

Notably, Terex expects revenue growth and operating margin improvement in every business segment in 2018. It will continue to implement the Simplify and Execute to Win strategy. The company witnessed benefits from commercial excellence and expects to realize gain from strategic sourcing in the second half of 2018. Moreover, focus on disciplined capital-allocation strategy and backlog strength will stoke the company’s growth.

Share Price Performance

Over the last year, Terex has underperformed its industry with respect to price performance. The stock has gained around 19%, while the industry recorded growth of 46% during the same time frame.

Zacks Rank and Other Key Picks

Terex currently sports a Zacks Rank #1 (Strong Buy).

Other top-ranked stocks in the same space include Caterpillar Inc. (NYSE:CAT) , H&E Equipment Services, Inc. (NASDAQ:HEES) and Avery Dennison Corporation (NYSE:AVY) . While Caterpillar sports a Zacks Rank #1, H&E Equipment Services and Avery Dennison carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar has a long-term earnings growth rate of 13.3%. The stock has appreciated 47% in a year’s time.

H&E Equipment Services has a long-term earnings growth rate of 17.4%. The company’s shares have been up 63% during the past year.

Avery Dennison has a long-term earnings growth rate of 7%. Its shares have rallied 26% over the past year.

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