Terex Corp. :TEX-US: Earnings Analysis: Q3, 2017 By the Numbers : November 21, 2017

Terex Corp. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Terex Corp. – Manitowoc Company, Inc., Astec Industries, Inc., Columbus McKinnon Corporation, Caterpillar Inc., Hyster-Yale Materials Handling, Inc. Class A, Oshkosh Corp, PALFINGER AG Sponsored ADR and NACCO Industries, Inc. Class A (MTW-US, ASTE-US, CMCO-US, CAT-US, HY-US, OSK-US, PLFRY-US and NC-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 1,111.20 million, Net Earnings of USD 56.60 million.
  • Gross margins widened from 17.62% to 19.34% compared to the same period last year, operating (EBITDA) margins now 7.10% from 5.92%.
  • Year-on-year change in operating cash flow of -3.48% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 1111.2 1181.7 1006.9 974.7 1056.4
Revenue Growth (%YOY) 5.19 -8.94 -29.43 -38.22 -35.64
Earnings (mil) 56.6 95.4 -60.3 -313.9 33.3
Earnings Growth (%YOY) 69.97 -12.96 18.73 -2250 -25.67
Net Margin (%) 5.09 8.07 -5.99 -32.2 3.15
EPS 0.63 0.98 -0.57 -2.52 0.89
Return on Equity (%) 3.88 5.9 -3.75 -18.28 1.75
Return on Assets (%) 6.15 9.63 -5.26 -23.74 2.38

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Market Share Versus Profits

Revenues History
Earnings History

TEX-US’s change in revenue this period compared to the same period last year of 5.19% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TEX-US is holding onto its market share. Also, for comparison purposes, revenues changed by -5.97% and earnings by -40.67% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 17.62% to 19.34% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 5.92% to 7.10% compared to the same period last year. For comparison, gross margins were 21.92% and EBITDA margins were 9.50% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

TEX-US’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now 115.73 days compared to 128.65 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

TEX-US’s change in operating cash flow of -3.48% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 4.05% to 5.53% and (2) one-time items. The company’s pretax margins are now 5.10% compared to 1.32% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Terex Corp. engages in manufacture of machinery products. It operates through the following business segments: Aerial Work Platforms; Construction; Cranes; Material Handling and Port Solutions; and Materials Processing. The Aerial Work Platforms segment designs, manufactures, services and markets aerial work platform equipment, telehandlers, light towers, bridge inspection equipment and utility equipment. The Construction segment includes compact construction equipment, such as loader backhoes; mini and midi excavators; site dumpers; compaction rollers; and other equipment, such as material handlers, concrete mixer trucks and concrete pavers. The Cranes segment provides mobile telescopic cranes, tower cranes, lattice boom crawler cranes, lattice boom truck cranes and truck-mounted cranes. The Material Handling and Port Solutions segment offers universal cranes, process cranes, rope and chain hoists, electric motors, light crane systems and crane components. The Materials Processing segment includes materials processing equipment, such as crushers, washing systems, screens, apron feeders, chippers and related components and replacement parts. The company was founded in October 1986 and is headquartered in Westport, CT.

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