Why Is Terex (TEX) Down 40.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Terex (TEX). Shares have lost about 40.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Terex's Q4 Earnings Surpass Estimates, Sales Miss

Terex reported adjusted earnings per share of 36 cents in fourth-quarter 2019 which beat the Zacks Consensus Estimate of 18 cents by a massive margin of 100%. However, the bottom line declined 55% from the prior-year quarter reflecting the ongoing challenging global market conditions for industrial equipment.

Including one-time items, the company reported earnings of 26 cents per share in the quarter, flat compared with the year-ago figure.

Operational Update

Revenues in the quarter declined 16% year over year to $885 million. Moreover, the company’s revenues missed the Zacks Consensus Estimate of $895 million. Cost of goods sold declined 14% to $716 million from $834 million in the prior-year quarter. Gross profit fell 21.4% year over year to around $169 million.

Selling, general and administrative expenses increased 9.5% to $146 million from $133 million in the prior-year quarter. Terex reported operating income of $22.9 million compared with $81.6 million in the year-ago quarter, reflecting a year-over-year decline of 72%. Operating margin was 2.6% in the reported quarter compared with 7.8% in in the prior-year quarter.

Segmental Performance

The Aerial Work Platforms (AWP) segment reported revenues of $500 million in the fourth quarter, down 21% from $631 million in the prior-year quarter. Operating income declined 88% to $4.4 million from the prior-year quarter.

The Material Processing (MP) segment’s revenues totaled $321 million, reflecting a year-over-year decline of around 10%. The segment reported operating income of $39 million, down 23% year over year.

Financial Position

Terex had cash and cash equivalents of $535 million at the end of 2019 compared with $340 million at 2018 end. In 2019, the company generated $173 million of cash from operating activities compared with $94 million in the prior year. Long-term debt was $1,169 million as of Dec 31, 2019, compared with $1,210.6 million as of Dec 31, 2018.

2019 Results

Terex reported adjusted earnings per share of $3.25 in 2019, down 20% from the prior year. Earnings beat the Zacks Consensus Estimate of $3.07. On a reported basis, including one-time items, earnings per share came in at $2.92 compared with $3.14 recorded in 2018.

Sales came in at $4,353 million in 2019 compared with the previous year’s $4,517 million. The top-line figure also missed the Zacks Consensus Estimate of $4,366 million.

2020 Guidance

Terex now projects earnings per share of $1.85-$2.35 for fiscal 2020 on net sales of approximately $3.9 billion. The company expects customers to remain cautious with their capital expenditure decisions in 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -82.98% due to these changes.

VGM Scores

Currently, Terex has a strong 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 second 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. Notably, Terex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.