Stock Story -
Lifting and material handling equipment company Terex (NYSE:TEX) missed analysts' expectations in Q2 CY2024, with revenue down 1.5% year on year to $1.38 billion. The company's full-year revenue guidance of $5.2 billion at the midpoint also came in 1.2% below analysts' estimates. It made a non-GAAP profit of $2.16 per share, down from its profit of $2.34 per share in the same quarter last year.
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Terex (TEX) Q2 CY2024 Highlights:
- Revenue: $1.38 billion vs analyst estimates of $1.43 billion (3.2% miss)
- EPS (non-GAAP): $2.16 vs analyst estimates of $2.07 (4.2% beat)
- The company dropped its revenue guidance for the full year from $5.3 billion to $5.2 billion at the midpoint, a 1.9% decrease
- EPS (non-GAAP) Guidance for the full year is $7.30 at the midpoint, beating analysts' estimates by 2.2%
- Gross Margin (GAAP): 23.8%, down from 24.4% in the same quarter last year
- Free Cash Flow of $42.3 million is up from -$68.9 million in the previous quarter
- Market Capitalization: $4.46 billion
With humble beginnings as a dump truck company, Terex (NYSE:TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.
Construction MachineryAutomation that increases efficiencies and connected equipment that collects analyzable data have been trending, creating new sales opportunities for construction machinery companies. On the other hand, construction machinery companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the commercial and residential construction that drives demand for these companies’ offerings.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Regrettably, Terex's sales grew at a weak 2.5% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Terex's annualized revenue growth of 13% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
This quarter, Terex missed Wall Street's estimates and reported a rather uninspiring 1.5% year-on-year revenue decline, generating $1.38 billion of revenue. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
Operating MarginTerex has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 9.1%, higher than the broader industrials sector.
Analyzing the trend in its profitability, Terex's annual operating margin rose by 9 percentage points over the last five years, showing its efficiency has meaningfully improved.
This quarter, Terex generated an operating profit margin of 14%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Terex's EPS grew at an astounding 108% compounded annual growth rate over the last five years, higher than its 2.5% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into the nuances of Terex's earnings can give us a better understanding of its performance. As we mentioned earlier, Terex's operating margin was flat this quarter but expanded by 9 percentage points over the last five years. On top of that, its share count shrank by 5.6%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Terex, its two-year annual EPS growth of 49.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q2, Terex reported EPS at $2.16, down from $2.34 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 4.2%. Over the next 12 months, Wall Street expects Terex to perform poorly. Analysts are projecting its EPS of $7.37 in the last year to shrink by 5.1% to $6.99.
Key Takeaways from Terex's Q2 ResultsWe enjoyed seeing Terex beat analysts' full-year EPS guidance expectations. We were also glad its EPS outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed and its full-year revenue guidance slightly fell short of Wall Street's estimates. Overall, this was a mediocre quarter for Terex. The stock traded down 4.8% to $62.50 immediately following the results.
