Terex Reports 6% Year-over-Year Decline in Net Sales in Quarterly Earnings Report

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Terex Reports 6% Year-over-Year Decline in Net Sales in Quarterly Earnings Report

Global lifting and material processing products manufacturer Terex Corporation (TEX) has announced its earnings report for the third quarter of 2024. In the report presented by CEO Simon Meester and CFO Julie Beck, the company reported net sales of $1.2 billion, a 6% decrease year-over-year, and earnings per share (EPS) of $1.46.

Despite the decline in sales, Terex completed its acquisition of ESG on October 8, with an expected EBITDA contribution of an additional $40 million in the fourth quarter from this acquisition. The company also highlighted its strong order book, financial strategy, and future growth expectations despite current market uncertainties.

Key Points

  • Terex's third quarter net sales were $1.2 billion, a 6% decrease compared to last year.
  • Earnings per share were $1.46, while EBITDA reached $141 million.
  • The company completed the acquisition of ESG, which is expected to add $40 million in EBITDA in the fourth quarter.
  • Terex anticipates operational synergies from the ESG acquisition to reach at least $25 million by the end of 2026.
  • Full-year EPS is projected to be between $5.85 and $6.25, with EBITDA expected to be between $635 million and $670 million.
  • A strong order book of $1.6 billion was reported, of which $1.2 billion belongs to the AWP segment.
  • The financial strategy includes $1.25 billion in term loans and $750 million in bonds, with a target of 2.5x net leverage by year-end.
  • Approximately $125 million in capital expenditures are planned for 2024, with a focus on the Monterrey facility.

Company Outlook

  • Terex expects full-year sales to be between $5 billion and $5.2 billion.
  • Annual EBITDA is expected to be between $635 million and $670 million.
  • The company projects full-year EPS to be in the range of $5.85 to $6.25.
  • Free cash flow is anticipated to be around $200 million for the year.
  • 2024 segment outlook: MP sales are expected to be around $1.9 billion and AWP sales around $3 billion.

Negative Highlights

  • The MP segment has faced challenges due to weak European markets and geopolitical uncertainties.
  • The AWP segment's performance was below expectations due to adjustments from rental customers.

Positive Highlights

  • The AWP segment experienced slight growth despite market challenges.
  • Terex has maintained a strong order book with an order/sales ratio above 100% over the last four to five quarters.
  • Significant EBITDA contributions and operational synergies from the ESG acquisition are expected.

Underwhelming Results

  • Free cash flow decreased from $106 million in the same quarter last year to $88 million.
  • Revenue guidance was revised down by $50 million due to softer market conditions than anticipated.

Q&A Highlights

  • Local project delays are primarily due to interest rate uncertainties, and a soft market is expected until the first half of 2025.
  • An improvement is anticipated in the second half of 2025, with mega projects expected to have a positive impact.
  • ESG's organic growth is expected to be positive in the coming years, while performance in other segments may vary.

In conclusion, Terex Corporation demonstrates cautious optimism about its long-term growth supported by a strong order book and the strategic acquisition of ESG. The company is focused on addressing current economic challenges while leveraging its financial strategy to support growth and reduce debt. Through various initiatives, Terex aims to maintain its market position and deliver value to its stakeholders in the upcoming periods.

InvestingPro Forecasts Terex Corporation's recent financial performance and strategic moves align with several key metrics and forecasts obtained from InvestingPro. Despite the reported 6% decline in net sales, Terex maintains a strong financial position with a market capitalization of $3.44 billion. The company's P/E ratio of 7.07 indicates it is trading at a relatively low earnings multiple, consistent with InvestingPro's note that Terex is "trading at a low P/E ratio relative to short-term earnings growth."

The focus on maintaining a robust order book and completing strategic acquisitions like ESG is reflected in its solid financials. Terex’s trailing twelve-month revenue for the second quarter of 2024 was recorded at $5.19 billion, showing a revenue growth of 4.22% during the same period. This growth, along with an EBITDA of $685.3 million and 6.0% EBITDA growth, highlights the company’s ability to deliver profits even amid challenging market conditions.

An InvestingPro tip emphasizes that Terex has "increased its dividend for four consecutive years," which is a positive sign for income-focused investors. The current dividend yield stands at 1.25%, with a dividend growth rate of 13.33% over the past twelve months. This commitment to shareholder returns aligns with another InvestingPro tip that states "liquid assets exceed short-term liabilities," reinforcing the company’s strong financial position.

For investors seeking more comprehensive analysis, additional InvestingPro tips and forecasts are available. Currently, there are eight more InvestingPro tips on Terex that provide deeper insights into the company’s financial health and market position.