Terex - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 net sales were $1.241B (+1.5% YoY), but margins compressed; GAAP EPS was -$0.03 vs $1.88 in Q4 2023, with adjusted EPS of $0.77 vs $1.41 a year ago.
• ESG was immediately accretive, delivering $228M revenue and 21.9% adjusted operating margin in Q4, offsetting weakness in legacy AWP/MP businesses amid channel adjustments and production cuts.
• 2025 outlook: net sales $5.3–$5.5B, EPS $4.70–$5.10, EBITDA ~$660M, FCF $300–$350M; segment view calls for Aerials down LDD, MP down HSD, Environmental Solutions up MSD.
• Bookings/backlog catalysts: year-end backlog rose to $2.3B (ESG $520M); Aerials Q4 book-to-bill 153%, with Q1 expected >100%, supporting mid-year margin recovery trajectory.

What Went Well and What Went Wrong

• What Went Well

  • ESG integration: “firing on all cylinders,” record bookings and rapid chassis-to-delivery throughput underpinned 21.9% adjusted operating margin in Q4; momentum expected into 2025.
  • Backlog/bookings strength: $2.3B total backlog with ESG $520M; Aerials Q4 book-to-bill 153% and expected >100% in Q1, positioning for stronger Q2–Q3 margins and volumes.
  • Cost actions and liquidity: legacy SG&A cut $14M YoY in Q4; liquidity of ~$1.2B at year-end and clear deleveraging plan despite acquisition financing.

• What Went Wrong

  • Margin compression in legacy segments: AWP Q4 OP margin fell to 3.1% (adj. 3.3%) and MP to 10.7% (adj. 10.9%) on aggressive production cuts, unfavorable mix, and lower volumes.
  • Interest/other expense step-up: Q4 interest and other expense rose to $41M and $14M respectively, largely tied to acquisition financing; full-year interest up versus 2023.
  • Macro headwinds: Europe remained soft; rate-sensitive private projects weighed on demand and rental conversions, impacting MP dealer restocking and AWP deliveries.

Transcript

Operator (participant)

Greetings and welcome to the Terex Q4 2024 Results Conference call. It is now my pleasure to introduce your host, Derek Everitt, Vice President, Investor Relations.

Derek Everitt (VP of Investor Relations)

Good morning and welcome to the Terex Q4 2024 Earnings Conference Call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer, and Julie Beck, Senior Vice President and Chief Financial Officer, along with Jennifer Kong, who will succeed Julie as Senior Vice President and Chief Financial Officer shortly after Terex files its 2024 Annual Report on Form 10-K. The remarks will be followed by Q&A. Please turn to slide two of the presentation, which reflects our Safe Harbor statement. Today's conference call contains forward-looking statements which are subject to risks that could cause actual results to be materially different from those expressed or implied.

These risks are described in greater detail in the earnings materials and in our reports filed with the SEC. On this call, we will be discussing Non-GAAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance. Reconciliations for these Non-GAAP measures can be found in the conference call materials. Please turn to slide three, and I'll turn it over to Simon Meester.

Simon Meester (President and CEO)

Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. As you know, this will be Julie Beck's last earnings call as she will be leaving Terex in April. I want to thank Julie on behalf of our team, our board of directors, and our shareholders for her commitment and contributions to Terex over these past three years. I also want to welcome our incoming CFO, Jennifer Kong, who started on Monday. Jen's extensive finance experience, including leading significant integrations and transformations in large multinationals, makes her a great fit for Terex. Looking at the year's performance, I'm very pleased by our improved safety performance, and as we enter 2025, our commitment to safety and the Terex values remain steadfast.

As we continue to transform and grow our company, our values will continue to include keeping each other safe, treating each other with respect and dignity, and being stewards of our environment and our community. Turning to slide four, our financial performance in the final quarter of 2024 was consistent with our Q3 outlook. For the full year, we delivered earnings per share of $6.11 on sales of $5.1 billion. This is the second highest full-year EPS performance in the company's history and a reflection of the strength of the Terex portfolio. As we discussed last quarter, AWP and MP scaled back production in the second half to align with industry-wide channel adjustments and will maintain a prudent operational posture for 2025. ESG executed very well in their Q1 with Terex.

In the period following the 8 October close, ESG earned $51 million, or 22% EBITDA, on revenue of $228 million, delivering on the commitment of being financially accretive from day one. I'm excited to see this level of performance continue into 2025 and beyond. Turning to slide five, ESG has a strong leadership team led by Pat Carroll that charted ESG's impressive growth over the past 15 years. In Q1 of 2025, Pat took on additional responsibilities, becoming President of our new Environmental Solutions segment, which includes ESG and Terex Utilities. I know Pat and the team will do a great job capitalizing on the many opportunities ahead, and thanks to detailed advanced planning, the integration team hit the ground running with eight work streams making progress.

We fully expect to deliver at least $25 million in operational run rate synergies by the end of 2026 and realize additional commercial opportunities as we integrate ESG into Terex. Turning to slide six, with the addition of ESG to our portfolio, approximately 25% of our revenue is from waste and recycling markets characterized by low cyclicality and steady growth. About 20% of our business is related to infrastructure, where significant investment is being put in place in the United States and around the world. Utilities is about 10% and growing as the well-documented need to expand and strengthen energy distribution is clear. General construction, which in the past had represented the majority of our end markets, is now less than a third. An important macro headwind is the elevated level of interest rates and uncertainty around the Fed's outlook.

We continue to see strong public sector spending on infrastructure and utilities, but rate-sensitive private projects continue to be impacted by the higher rates. Policies that stabilize inflation, enabling rate reductions, would unlock pent-up demand on the private investment side. We are encouraged by the improved sentiment that followed the U.S. election in November. The new administration's focus on easing the regulatory environment for new projects and encouraging growth and investment in the United States are stimulants for many of our end markets. With over 2/3 of our revenue coming from North America, a strong U.S. economy is an important overall tailwind for us. We're closely following the administration's approach to international trade policy. It is important to understand that the majority of the products we're selling in the United States we make in the United States, which limits our exposure.

Moreover, we initiated mitigation actions last year in anticipation of additional tariffs, leveraging our global capabilities to manage the impact. As a global company with a significant footprint in the United States and around the world, we have optionality and are ready to take additional actions if needed. Turning to Europe, we continue to see a generally weak economic environment. We do remain encouraged by increasing adoption of our products in emerging markets such as India, Southeast Asia, the Middle East, and Latin America. Please turn to slide seven. While we see shorter-term adjustments in some of our legacy markets, we continue to be highly confident in our longer-term growth outlook. Our portfolio of strong businesses will continue to benefit from megatrends, onshoring, technology advancements, and federal investments.

We continue to see record levels of megaprojects in data centers, manufacturing, semiconductor plants, and others, with more projects expected to come online through 2027. We anticipate increased activity from infrastructure investments, from roads and bridges to airports, railways, and the power grid. We are encouraged by the new administration's support for AI, power, and other infrastructure investments, and while priorities may shift, we believe these high investment levels will continue. Turning to slide eight, we started implementing our revised Execute, Innovate, and Grow strategy and will continue to drive progress in 2025 and beyond. As said, we are evaluating our global footprint, focusing on opportunities to reduce fixed costs while improving operational performance and efficiency. When it comes to innovation, we have a very exciting new product development pipeline focused on maximizing return on investment for our customers.

We also continue to invest in robotics, automation, and digitizing work streams to make our operations more efficient and more flexible. Turning to growth, completing the ESG acquisition was a significant step forward. We fully expect organic growth in that business to continue in line with its demonstrated performance over the past decade. On the utilities front, we are unlocking growth potential by improving productivity and expanding capacity as the long-term demand outlook continues to expand. Our MP and Aerials businesses will manage through the current portion of the cycle before returning to growth as the need for more replacement equipment and megatrends are expected to remain significant tailwinds. Overall, we have a $40 billion addressable market with significant upside for our businesses. Turning to slide nine, maintaining industrial market leadership requires a regular cadence of new innovative product introductions.

Our businesses pride themselves on bringing groundbreaking products to market that improve ROI for our customers. A great example is the completely redesigned next-generation Genie Slab Scissor family pictured on the left. The new Genie Scissors provide our customers with industry-leading quality, performance, and significantly lower total cost of ownership. Included in the launch is the first-ever Genie Scissor that does not use any hydraulic oil, which is perfect for the rapidly growing data center and entertainment markets. The middle picture features the industry's first all-electric refuse collection body, recently introduced by Heil. While en route, the automated side loader is entirely electrically actuated with no hydraulics. It can plug directly into an electric chassis battery or run on its own battery to maximize the vehicle's collection range.

Customers love it because it has demonstrated fuel savings of up to 38% and supports sustainability and contamination reduction objectives while delivering excellent productivity. And finally, the image on the right shows our new brush chipper, the latest addition to our new Green-Tec product line. We launched Green-Tec last year to focus on the growing tree care and vegetation management markets. The team is doing a great job growing the new business line, entering 2025 with a healthy backlog. Each of these new product offerings are examples of the strength and the leverage of the Terex portfolio to maximize ROI for our customers in a diverse and continually expanding market. And with that, I'll turn it over to Julie.

Julie Beck (SVP and CFO)

Thank you, Simon, and good morning, everyone. Look at our Q4 financial results found on slide 10. Total net sales of $1.2 billion were up slightly versus the prior year due to the addition of ESG. Sales in the legacy segments were down 17%, largely in line with our expectations due to industry-wide channel adjustments. Gross margin of 19% reflects lower year-over-year margins in the legacy segment, partially offset by accretive margins from ESG. Volume, unfavorable manufacturing variances, and mix in the legacy segment were partially offset by cost reduction actions. We reduced legacy SG&A expenses by $14 million, or 10.4% year-over-year, as we executed cost reduction actions and lowered incentive compensation. Operating profit was $97 million, or 7.8%. Interest and other expenses were $39 million, $24 million higher than last year due to interest on acquisition-related financing.

The Q4 effective tax rate was 10.9% compared to 18.7% in the Q4 of 2023 due to favorable jurisdictional mix and discrete one-time items. Earnings per share for the quarter was $0.77, and EBITDA was $114 million. Free cash flow for the quarter was $129 million compared to $135 million in the Q4 of 2023. Turning to slide 11 for the full-year results, total net sales of $5.1 billion were generally aligned with 2023 as the Q4 addition of ESG offset a 4.9% decline in legacy revenue. Gross margin of 21.7% was 120 basis points lower year-over-year as volume and unfavorable mix in the legacy segments were only partially offset by cost reduction actions and the Q4 accretion from ESG. We reduced legacy SG&A expenses by $18 million, or 3.4% for the full year, through cost reduction actions and lower incentive compensation.

Operating profit was $582 million, or 11.3%. Interest and other expenses were $83 million, $20 million higher than last year due to interest on acquisition-related financing. The full-year effective tax rate was 17.2%, 100 basis points better than the prior year due to favorable geographic mix. Earnings per share for the year was $6.11, as Simon mentioned that is the second highest in Terex history, and EBITDA was $642 million, or 12.5%. Free cash flow of $190 million was down from last year due to lower net income, including higher interest expense, increased working capital, and a one-time benefit in the prior year associated with the sale of the Oklahoma City facility. Please turn to slide 12 to review our segment results, starting with AWP. AWP sales of $3 billion for the year represent 3% growth compared to 2023, with similar growth rates in Aerials and Terex Utilities.

The year was characterized by a return to seasonal delivery pattern, which we expect to be the norm going forward. During this market transition, we were encouraged to see market share gains resulting from new products and other customer-focused improvements made by the team. Full-year AWP operating margin was 11.6%. Consistent with our Q3 outlook, Q4 margins were impacted by aggressive production cuts, product moves, and unfavorable mix in Aerials. The Genie team continues to optimize manufacturing footprint, drive operational efficiency, and introduce a host of new products that maximize return on investment for customers. Please turn to slide 13 to review MP performance. Full-year sales of $1.9 billion were 14.6% lower than the prior year due to industry-wide channel adjustments, combining with challenging macroeconomic factors in Europe, especially in the second half.

On the aggregate side, we saw machines on rent longer than usual, impacting dealers' replenishment of new units. The European market was weak all year, which initially impacted material handling, cranes, and eventually aggregates. Our U.S. concrete and India aggregate businesses were bright spots, both growing in the Q4. MP's solid 13.6 full-year operating margin was impacted by lower volume and unfavorable product and geographic mix, partially offset by cost reduction actions. Please turn to slide 14 to review ESG. We were very pleased with the ESG's performance following the 8 October close. The business achieved 21.9% operating margin on net sales of $228 million, representing meaningful growth and profitability improvement over the prior year period. Operational initiatives on both collection vehicle and compactor production contributed to the margin expansion. EBITDA in the period was $51 million, or 22% of sales.

We are very excited about ESG's 2025 and future contributions to Terex. Please turn to slide 15. In the Q4, we funded the ESG acquisition at favorable rates and terms and maintained our corporate rating. We continue to maintain a solid balance sheet and flexible capital structure with the right mix of secured and unsecured debt and variable versus fixed rates. We can prepay or reprice a significant portion of the debt, and we do not have any maturities until 2029. We continue to have ample liquidity with a year-end leverage ratio of 2.6x based on the calculation in our credit agreement. We plan to deleverage in future periods as we generate increased cash flow from operations and take advantage of cash tax benefits associated with the acquisition. We will also continue to invest in our businesses, fueling organic growth and profitability improvement.

We reported a return on invested capital of 19.4%, well above our cost of capital. Returning capital to shareholders remains a priority. In 2024, Terex returned $92 million to shareholders through share repurchases and dividends, more than offsetting equity compensation dilution. We have $86 million remaining under our share repurchase authorization, and we will continue to buy back shares. Terex is in a strong financial position to continue investing in our business and executing our strategic initiatives while returning capital to shareholders. Turning to bookings and backlog on slide 16. Our current backlog of $2.3 billion includes a very healthy $520 million for ESG and $1.8 billion for our legacy businesses, which is in line with historical pre-COVID norms. As expected, we saw booking trends return to historical patterns, with the Q4 traditionally being a seasonally strong bookings period.

Book-to-bill for the legacy business was 116%, led by Aerials component of AWP at 153% as rental customers ramped up orders for 2025. Moreover, the Genie team has secured sizable additional 2025 commitments from large customers in January. We expect book-to-bill of greater than 100% again in the Q1, providing further support for our Aerials 2025 outlook. MP has returned to its traditional book-to-bill cadence, supported by reliable lead times with backlog coverage of approximately three months. ESG backlog of $520 million heading into 2025 is up 16% from the prior year. Its strong Q4 bookings of $255 million represents 112% book-to-bill, supporting our growth outlook for ESG. Now turn to slide 17 for our 2025 outlook. We are operating in a complex environment with many macroeconomic variables and geopolitical uncertainties, and results could change negatively or positively.

With that said, this outlook represents our best estimate as of today and does not include the impact of any new tariffs or trade policy changes that are not currently in effect. We expect overall growth in 2025 with the full-year contribution of ESG, anticipating net sales of approximately $5.4 billion, with a segment operating margin of about 12% and EBITDA of roughly $660 million. Interest and other expenses will increase compared to 2024 due to acquisition-related financing to an expected full-year total of about $175 million. We expect 2025 earnings per share of between $4.70 and $5.10 on lower legacy volume, partially offset by accretive ESG growth.

From a quarterly perspective, we anticipate a slower start to the year, delivering about 10% of our full-year earnings per share in the Q1 as we continue to execute the corrective actions we deployed in the Q4 to set us up for the longer term. We expect about 2/3 of the full-year earnings per share over the middle two quarters. We expect a significant increase in free cash flow compared to 2024, anticipating between $300 and $350 million in 2025, driven by working capital reductions and a full year of ESG cash generation, while continuing to invest in our businesses with expected CapEx of approximately $120 million. Looking at our segments, during the Q1, ESG was combined with Terex Utilities to create Environmental Solutions, or ES. MP is unchanged. And Aerials, which is our Genie business, will be reported standalone.

We will provide historical comparative information when we release our Q1 2025 results. Let's start with Aerials. We expect sales to be down low double digits compared to $2.4 billion in 2024. Excluding Q1 one-timers, we expect full-year 2025 margins to be consistent with our 25% incremental target. As a result, and consistent with historical seasonal patterns, we expect the second and Q3 to be the highest margin quarters. We expect MP sales to be down high single digits compared to the prior year, Europe to remain generally weak, with North America starting slowly, then picking up steam as the year unfolds. We anticipate MP to achieve incremental margins well within our 25% target. ESG had a strong Q4, and we expect that momentum to carry into 2025, combining with utilities to generate mid-single digit sales growth for the ES segment.

Loader RCV demand remains strong, and the Marathon team has implemented several commercial excellence programs that continue to drive growth in compactors. Utilities demand remains strong, with backlog stretching into 2026. The 2024 comparable baseline for ES is revenue of $1.5 billion, with an operating profit of 17%. We anticipate continued strong margin performance for ES in 2025 through new product introduction, operational improvements, and synergy capture. With that, I will turn it back to Simon.

Simon Meester (President and CEO)

Thanks, Julie. I will now turn to slide 18. Terex is very well positioned to deliver long-term value to our shareholders. We have a strong portfolio of industry-leading businesses across a diverse landscape of industrial segments with attractive end markets. We will continue to demonstrate improved through-cycle financial performance as we integrate ESG and realize synergies across the company. As always, I want to close by thanking our team members around the world.

We have made great strides together, and we will continue to grow our company together. I am very excited about the road ahead for Terex. With that, I would like to open it up for questions. Operator?

Operator (participant)

As a reminder for today's session, please limit to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jerry Revich from Goldman Sachs. Please go ahead.

Jerry Revich (Analyst)

Yes, hi. Good morning, everyone. Hey. Good morning, Simon. Hi. Congratulations on the strong ESG performance out of the gate. You know, what really stood out was the margin performance in the quarter and the year-over-year growth. Can you just talk about the sustainability of the margin performance we saw in the quarter, whether there's any payroll mix or any other pieces, because that looked to be up significantly year-over-year as we think about the outlook heading into next year? And the other dynamic is ES has picked up significant share over the past, you know, post-COVID cycle. It looks like, based on the bookings, it looks like that momentum's continuing, but I'm wondering if you could just double-click on that for us, if you don't mind.

Simon Meester (President and CEO)

Yeah. No, thanks for the question. No, other than just they're firing on all cylinders. You know, it's been a record year for them in terms of bookings, sales, deliveries, new product introductions, throughput. You know, they basically can turn a bare chassis into a full-blown refuse collection truck in less than 60 days, which gives a big network and capital advantage to their customers. So it's just an all-out success story. Nothing really, you know, that helped them in terms of mix other than just great performance. And we see that carry over into 2025. They're literally firing on all cylinders. So we're very pleased with, obviously, ESG joining the Terex family, and we're very excited about 2025.

Julie Beck (SVP and CFO)

And then really strong bookings in the quarter, you know, that points to a really strong 2025 as well, Jerry. So very excited.

Jerry Revich (Analyst)

Super. And can I shift gears, Simon? Let me just give you an opportunity to comment on the company's ability to move around the sourcing, given, you know, every two days we're looking at a different potential tariff picture. I think initially, when you were contemplating changes in the footprint, you were targeting significantly more than 25% cost savings to make the investment move. So I'm wondering if you could just flesh that out for us since that's been a key topic over the past couple of weeks.

Simon Meester (President and CEO)

Yeah. Are you asking particularly about North America or what kind of tariffs are you asking?

Jerry Revich (Analyst)

Yeah, yeah, I apologize. Yeah, the tariff picture in North America, given the potential for tariffs to be implemented on Mexico and Canada, I just wanted to give you a platform to expand on what the company can do.

Simon Meester (President and CEO)

Yeah. Obviously, it's been a bit of a roller coaster in the last couple of weeks, but yeah, overall, you know, I said this in my opening remarks. At the end of the day, we're still a U.S.-based manufacturer. At the Terex level, we have 11 factories in the United States, one in Mexico, one in Canada, so the lion's share of what we sell in the United States, we make in the United States, but, you know, having said that, you know, we have a lot of optionality, to be very honest with you, Jerry, no matter kind of what the outcome will be, if anything will change. You know, we run single shifts in most of our U.S. factories.

We can reroute demand across our factories. We source from the Monterrey facility, from other facilities as well, so we have a dual source setup that we can play with, so we have a lot of optionality, but we're still very pleased with our Monterrey facility. It's a world-class facility. It's state-of-the-art manufacturing, and we can use that facility no matter kind of what happens with the U.S. landscape. But we like where we are from a competitive standpoint, the optionality that we have. We have multiple mitigation plans ready to go if the situation would change. And we think that if something like were to happen, that, you know, we would be able to mitigate most of it, and it wouldn't make a significant impact on our guidance either way.

Jerry Revich (Analyst)

Super. Thank you.

Simon Meester (President and CEO)

Thanks for the question.

Julie Beck (SVP and CFO)

Thanks, Jerry.

Operator (participant)

Your next question comes from the line of Steven Fisher from UBS. Please go ahead.

Steven Fisher (Analyst)

Thanks. Good morning and best wishes, Julie. Thanks for all the help and congratulations, Jen. Just want to start off by asking about the AWP order trends, how they came in relative to your expectations for the quarter, and kind of what you see your customers doing with their fleets this year. Is this sort of just a replacement year? Is it a bit of a shrinking? How do you kind of frame that? I know you said you've secured some additional commitments in January. So how important is the Q1 relative to sort of the seasonal picture of bookings? Was there something, you know, of more clarity that the industry got in January that enabled those commitments?

Simon Meester (President and CEO)

Yeah. Great question. We're just going back to kind of normal patterns. So typically, we take most of our annual agreements in Q4 and then some in Q1. And that's kind of where we're going back to. So in Q4, we secured 153% book-to-bill. Very pleased with the order intake. And then again in Q1, we expect to be north of 100%. So we feel really good about our sales outlook for Aerials.

Other than, you know, in terms of kind of the seasonality, we expect in 2025 to Q2 and Q3 to go back to being traditionally the strongest quarters like it was pre-COVID. In terms of what our customers are telling us, yeah, it is mostly replacement demand, to your point. But, you know, fleet utilization is still healthy levels. Fleets are not really, you know, that aged anymore, so they're where they need to be. But they have a strong project pipeline. They've been very transparent with us on kind of what they need and, you know, at what time they're going to need their product. So we just see the year going back to normal, if you will. We're very pleased with our backlog and our coverage for the year.

Steven Fisher (Analyst)

Okay. That's very helpful. And then I guess on Europe, can you just give us a sense of, you know, kind of momentum there? Is it still getting weaker? Is it stabilizing? And any sense of what it will take to get that going a little bit more positively?

Simon Meester (President and CEO)

Are you referring to Terex in general or Aerials?

Jerry Revich (Analyst)

In general, across the business.

Simon Meester (President and CEO)

Yeah. Our expectation is that Europe is going to continue to stay soft in 2025. We do see some pickup. Some fleets are starting to age. For example, in handling, some of our crushing and screening fleets start to age. So there's going to, you know, there's going to be some demand around replacement. But generally speaking, we are assuming a soft market for 2025. In terms of resi and commercial construction, for sure, there's a little bit of pickup in civil in some of the European markets.

But overall, we see the market will continue to stay soft. Now, having said that, there are a couple of businesses that are showing signs of bottoming. For example, we see some pickup in our cranes business. We see some positive quoting activity. We see some positive bookings. And then there are some bright spots, like Saudi is a bright spot for us. So there are some markets that are doing slightly better. But as a general statement, we expect Europe to remain soft in 2025.

Steven Fisher (Analyst)

Got it. Thank you very much.

Simon Meester (President and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Tami Zakaria from JPMorgan. Please go ahead.

Tami Zakaria (Analyst)

Hey, good morning. Thank you so much. My first question is on the ESG outlook up mid-single-digit percent you're expecting this year, which seems a bit lower than the high single-digit CAGR that business has seen historically. So what's driving that outlook? Is it including the legacy Terex Utilities business or just the ESG portion? So any color there would be helpful.

Simon Meester (President and CEO)

Yeah, it does include utilities. So those two businesses combined. And if you break it apart, in ESG, as I said, firing on all cylinders, as to Julie's point, we have strong record backlog coverage, actually, for ESG going into 2025. And then in utilities, we're still a little bit constrained on supply. So we're actually expanding capacity because we're now starting to quote into 2026 for our utilities business. So our focus on 2025 will be to just continue to ramp up production on the utility side. And that might just drive a little bit of caution in our revenue guide for ES overall, but it's not because of ESG.

Tami Zakaria (Analyst)

Got it. Got it. That's very helpful. And then the other question is, I think I heard you say the Q1 EPS would be about 10% of the full guide. So could you just give us some pointers on how to model the Q1 in terms of the segments, especially AWP? I'm just trying to understand how to get to that 10% EPS for the three segments.

Julie Beck (SVP and CFO)

Yes. So, you know, so what we would expect, you know, first of all, you know, for the Q1, again, 10% of our earnings per share would be in that Q1. And, you know, we would say that, you know, the revenues in our Aerials business would, you know, be seasonally lower in the Q1. And as well, you know, we took production down in the Q4, which impacted margins. And, you know, Simon refers to it as a speed bump.

And, you know, we will continue to do that in Q1 to match production with our demand. So production will be lower in the Q1 for our Aerials business. MP will have a lower Q1 as well. They will continue to improve throughout the year, and they'll perform well within our 25% decremental targets. And the ES business is just going to be strong and steady throughout the year, consistent performers throughout the year. So that's how we expect to see the year unfold, and particularly in Q1. But Q1 will primarily be impacted by some lower volumes, both in MP and the Aerials segments, and some lower production volumes.

Tami Zakaria (Analyst)

Got it. Thank you so much.

Operator (participant)

Your next question comes from the line of Stephen Volkmann from Jefferies. Please go ahead.

Stephen Volkmann (Analyst)

All right. Thank you, guys. Julie, my thanks as well, and welcome, Jen. Just to follow on Tami's question there, Julie, your comments about lower, are you talking about lower year-over-year in the Q1, or is it actually sequentially lower than the fourth?

Julie Beck (SVP and CFO)

Yeah. So we are going to be lower year-over-year and fairly consistent from Q4 to Q1 in terms of production.

Stephen Volkmann (Analyst)

Okay. Great. Thank you. And then maybe, Simon, a couple of kind of really big picture questions. I'm curious if you have any comments to, you know, what you think is happening with the AWP cycle. Are we in sort of a lull here and it starts to regrow going forward, or do we have sort of a more protracted downturn? Just any kind of views from your seat would be great.

Simon Meester (President and CEO)

Yeah. So, you know, obviously, we're not ready to guide for anything beyond 2025. So, I'm mostly going to talk about 2020, sorry, 2025. We're not ready to talk about 2026. But overall, we're seeing U.S. to remain resilient and Europe and the rest of the world to remain soft. That's the story for us for 2025. megaprojects, main tailwind in the U.S. We do see spending on the large projects continue to grow, although at a lower pace. But infrastructure and now with manufacturing onshoring will continue to be a tailwind for us, and that will carry forward. We see positive customer sentiment, strong project pipeline.

But yeah, there could be upside if interest rates, you know, will come our way and private, more local, smaller projects will start to pick up again. But for 2025, it's mostly replacement demand, and that's what drives our kind of compressed outlook for Aerials. And then we'll have to see what happens going into 2026.

Stephen Volkmann (Analyst)

Okay. Thanks.

Operator (participant)

From the line of Jamie Cook from Truist. Thank you. Please go ahead.

Jamie Cook (Analyst)

Hi. Good morning. I guess just two follow-up questions. One just on ESG, you know, just trying to understand how you're thinking about the accretion of ESG in 2025 relative to when you announced the deal and you talked about double-digit accretion. It doesn't sound like anything's changed given the performance in the quarter and what you've seen in bookings, but I just want to clarify that because it's hard to back into it the way you guided. And then I guess just my second question, you know, on the Aerials business, understanding, you know, you had strong orders, I think you said in January, and we expect normal seasonality.

So I'm just trying to understand to what degree how you're thinking about pricing and giving yourself flexibility, I guess, if we do get into a situation, you know, where tariffs become an issue. I mean, I think tariffs under Trump's last administration managed very well in terms of like price-cost and managing that, but just wondering how you're thinking about managing the business and getting these orders with tariffs potentially on the come. Thank you.

Simon Meester (President and CEO)

Okay. I'll let Julie take the first part, and I'll take the second part.

Julie Beck (SVP and CFO)

So the ESG again, you know, great Q4 performance we expect, and there's no change from when, you know, we announced ESG and brought them in in October. We expect continued solid performance for ESG and then to be, you know, add accretion to our earnings. And we expect them to do really, really well, and nothing's changed. We're even, you know, even feel better because of the great performance in Q4 and going into 2025.

Simon Meester (President and CEO)

Yeah, and on the tariffs pricing side, if tariffs were to come our way, and you know, that's obviously a big if, and we can only speculate, but our aim would be to mitigate this, you know, ourselves first and foremost. That would be the angle. And we think we can mitigate a big piece of it depending on what kind of tariffs we will have to deal with, so our aim will be to obviously stay disciplined on pricing. We aim to be price-cost neutral, and there's still inflation other than tariffs, you know, in our industry, material freight and labor. So we want to stay disciplined on pricing, but when it comes to tariffs, our first approach will be to mitigate as much of it ourselves.

Jamie Cook (Analyst)

And before you cut me off, Julie, I just wanted to say thank you for all your help and congrats on a great performance and congrats to whatever is ahead. Thank you.

Julie Beck (SVP and CFO)

Thank you.

Operator (participant)

Your next question comes from the line of David Raso from Evercore ISI. Please go ahead.

David Raso (Senior Managing Director, Partner, and Head of Industrials and Machinery Research Team)

Hi. Thank you for the time, and also congratulations, Julie. I don't want to make this a math question, but given the moving parts, the lack of the restate, I apologize in advance for the math here. Can you? I don't understand the decremental margin commentary on the segments, the down, you know, within our 25% target. To help me get a better sense how that's possible, what is the operating margin you're assuming ESG Dover has? The standalone business, don't blend it with the utility.

So the business that just reported 21.9% for the quarter, I know it was a stub quarter. What are you thinking that business standalone EBIT margin would be for 2025?

Julie Beck (SVP and CFO)

David, we would expect ES margins to be, the ESG margins to be comparable in 2025 with 2024, both of the stuff.

David Raso (Senior Managing Director, Partner, and Head of Industrials and Machinery Research Team)

With that stub number?

Simon Meester (President and CEO)

Yeah. No major changes.

David Raso (Senior Managing Director, Partner, and Head of Industrials and Machinery Research Team)

Okay. So again, I apologize in advance, but we have a lot of moving numbers here. We don't have normal detail. If you strip out ESG Dover, you have 2024 revenues, $4.9 billion, and take out the $50 million of EBIT, right? So the EBIT's $532 million, 10.9% margins. I want to look at legacy, legacy. Then we have a guide of $5.4 billion, but roughly $900 million is ESG Dover. So legacy, legacy, it's $4.9 billion of revs going to $4.5 billion.

If I look at the EBIT implied for 2025 all in, right, 12% margins on the $5.4 billion, take out the $75 million of corporate expense. So we're at $573 million of EBIT all in. But if you pull out the $900 million of revenue from Dover and pull it out at a 21.9% margin, it's implying the legacy company has decrementals of 39%. So how does AWP and MP say we're 25% decremental margins? So again, I apologize for all that math. But again, the decrementals legacy appear to be closer to 40% than the 25% you're implying. And again, I apologize, but that is the math. I'm just trying to understand. Thank you.

Julie Beck (SVP and CFO)

So David, thanks for the question. So what we're talking about and what we had in our remarks is that, you know, again, we have some spillover into Q1 in our Aerials business where we're taking production down to meet demand. And what I indicated is that from Q2 to Q4, that business will, you know, be within our 25% decremental margin targets from Q2 to Q4. As far as our MP segment, they will be well within our 25% decremental for 2025.

David Raso (Senior Managing Director, Partner, and Head of Industrials and Machinery Research Team)

Okay. So AWP decrementals for the full year, and again, I know it's just a bad start, but for the full year, they're down, whatever, 40% to 50% decrementals for the year. It's just saying, hey, all that pain is in the Q1, and then we kind of get within our normal trajectory of decrementals after that. That's the key wrinkle there.

Simon Meester (President and CEO)

We don't quite get those numbers, but directionally, you're correct.

Julie Beck (SVP and CFO)

Yes.

David Raso (Senior Managing Director, Partner, and Head of Industrials and Machinery Research Team)

Okay. Really appreciate it. And lastly, on the orders for 2025 on AWP, any sense of price or even price-cost, just trying to get a sense of the comfort of improving those margins after the Q1, just a better sense of why the decrementals would be so much better the rest of the year.

Simon Meester (President and CEO)

Yeah. Just, you know, it's obviously a big volume tailwind Q2, Q3. That's where most of the margin improvement will come from. We expect to be in the double-digit range again in Aerials in Q2 and Q3, and a lot of that will be volume. But when it comes to pricing, we obviously don't call out specifics, but, you know, the aim is always and will be and will continue to be price-cost neutral, and that's what we want to be for 2025 as well.

David Raso (Senior Managing Director, Partner, and Head of Industrials and Machinery Research Team)

I appreciate it. Thanks so much.

Simon Meester (President and CEO)

Yeah. Thank you.

Operator (participant)

Your next question comes from the line of Mig Dobre. From Baird, please go ahead.

Mig Dobre (Analyst)

Yes. Thank you. Good morning, Julie. All the best to you going forward. I want to ask an MP question here. When I was looking at your outlook, one of the things that stood out to me is that you expect MP to decline less than AWP, but arguably speaking, the orders and backlog pressure is maybe even greater here in MP. So I guess what I'm wondering is, why is that the case? How do you think about demand, just outright customer demand as the year progresses? It seems like you might have some improvement baked in here. And then on Q1, how should we think about this segment relative to what you put up in Q4 from a margin standpoint?

Simon Meester (President and CEO)

All right. I'll take the first part, the top line, and then I'll let Julie talk about the bottom line. So good question, Mig. Yeah. Backlog coverage compared to the other two legs of the stool seems a little less favorable. But don't forget, it's mostly a dealer model. So we have pretty strong forward in MP. So we have pretty strong forward visibility. And historically, MP has been, if compared to the other two segments, more of a book-to-bill business with one quarter forward visibility. But what we do see is, you know, I mentioned that Europe is soft. The United States has more upside for us. We do see some, you know, more positive quoting activity. We do see a pickup in orders actually going into the Q1. We do see fleet utilization is still high in the MP fleet, and fleets are aging.

So if you just combine all those elements, underlying demand strong, inventories where they need to be, fleet utilization still high, fleets starting to age, combined with what our dealers are telling us and what our quoting activity and our bookings are saying going to Q1, we feel comfortable with the guide that we have on MP. But yeah, in terms of backlog coverage, they're the lowest of the three segments that we have.

Julie Beck (SVP and CFO)

And from a margin perspective, maybe, you know, the MP business in 2024, you know, down 15% in sales and maintained, you know, 13.5% margins. You know, their margin performance continues to be strong. In terms of Q1, you know, the margins will be fairly consistent with Q4. That's what I would use for modeling purposes going forward. And we expect them to do really well this year again, to be well within the 25% incremental.

Simon Meester (President and CEO)

I would just add one more point there. Thanks, Julie. Yes, that the current guide kind of assumes MP bottoming in Q1 and then sequentially improve every quarter throughout 2025. That's the current model for MP.

Mig Dobre (Analyst)

Okay. That's very helpful. My follow-up goes back to the discussion around tariffs, and I guess the way I kind of interpreted your comments was that you would be looking at potentially changing your manufacturing footprint as a result. If that's the case, I do wonder what that does structurally for your margins because as I understood it, your investment in Mexico was really kind of the fundament for improved margins in AWP longer term. Is that no longer the case?

Simon Meester (President and CEO)

I didn't mean to imply that we were going to change our footprint. We have multiple options. One of them being to repurpose the facility. One could be to ramp up, just ramp up shifts in, or go to double shifts in the United States. Another could be to reroute demand. So I didn't mean to imply that we're changing anything on our footprints. We just have the optionality to move production around, to move demand around, and to flex productivity in each of our facilities in terms of going to double shifts or single shifts. So it didn't mean to imply that we're going to change any brick and mortar or not.

Mig Dobre (Analyst)

But what about the margin issue here?

Julie Beck (SVP and CFO)

I mean, so you know, Mig, you know, the Aerial team is working on all sorts of initiatives, you know, today, you know, new products, you know, productivity improvements, footprint optimization, cost-out actions that continue to improve margins long term as well.

And the Monterrey facility, you know, is certainly a lower-cost facility and has performed, you know, really well for us. And we would continue to use that facility and just use it for other regions if, you know, depending upon what happens. You know, we're just scenario planning here, but we would continue to be a part of our footprint.

Simon Meester (President and CEO)

It's a very competitive facility, and we can serve other pockets of the world from Monterrey if need to.

Mig Dobre (Analyst)

Understood. Thank you.

Simon Meester (President and CEO)

Thank you. Thanks for the question.

Operator (participant)

Your next question comes from the line of Kyle Menges from Citigroup. Please go ahead.

Kyle Menges (Analyst)

Thanks. And congrats, Julie. I just wanted to dive deeper into the ESG margin comments. So if I heard you guys correctly, it sounded like ESG margins guiding to kind of flat year-over-year. So I'm just confused, I guess, like why it wouldn't be a bit better if you're assuming growth for ESG and then some synergies as well. I guess what synergies are embedded in the guidance and has the magnitude or timing of synergy capture changed at all since you announced the deal?

Julie Beck (SVP and CFO)

Yes. So thanks for the question, Kyle. So first of all, you know, we remain very confident and pleased with the ESG acquisition. You know, really, really pleased with our performance. And, you know, we talked about, you know, that we would have $25 million of run rate synergies as we exit 2026. And so that we are still, you know, well on target for that. We have visibility to that. And, you know, it's very early in our teams are working together. There are eight teams, as Simon mentioned, you know, working on integration.

We're really pleased, but it's early for us to come out, you know, and comment on synergies. All to say that we're very pleased and things are on track. And so I can comment on that on synergies. And then for the ES, you know, ES segment going forward, you know, we're talking about continued strong performance in 2025 and, you know, really, you know, strong operating margins and, you know, for the full year.

Kyle Menges (Analyst)

Okay. Thanks. And then just a quick math follow-up question. Apologies in advance, but just looking at the guidance. So if I take the, I guess, the midpoint of revenue and op margin guidance, I'm getting to, I think, adjusted operating margin around 575. And then adding back the D&A, I'm getting to EBITDA around 735 versus the EBITDA guide of 660. So is that 660 number for EBITDA an unadjusted number, or is that kind of the delta that I'm missing?

Julie Beck (SVP and CFO)

The 660 would be an adjusted number. So, you know, the 660 is an adjusted number.

Kyle Menges (Analyst)

Okay. Thanks.

Operator (participant)

Your final question comes from the line of Tim Thein from Raymond James. Please go ahead.

Tim Thein (Managing Director and Analyst)

Oh, great. Thank you. Maybe just we'll wrap it up in two combined questions on the ES business that was just acquired. So the Heil-owned business. The first is just from a customer mix standpoint. And I forget if this came up when you announced the deal on the call, but, you know, post-COVID, it seems that the bulk of the deliveries in terms of on the refuse side have been centered more into the Big Four major players.

And I'm just wondering, as chassis availability improves, is there more of a broadening out in terms of, you know, from a customer mix perspective, does that benefit the company in terms of potentially shifting more to local refuse operators in terms of who's getting those deliveries? So maybe that's question one on the customer mix. And then on the technology, it seems, at least from what we've heard from the operators, that this 3rd Eye technology is really well regarded and respected. And I'm wondering if there's opportunities for Terex to potentially leverage that across other parts of the organization. I don't know if that's feasible, but just curious if that's something that you've explored since taking over the business. Thank you.

Simon Meester (President and CEO)

Yeah. Great question. So the first part, yeah, we don't see a meaningful change in customer mix in 2025. Chassis do become more available, and most of our customers, you know, buy their own chassis, and they're not on our balance sheet. So one of the things that the Heil-owned team is really great at is turning that around, as I mentioned in my, I think, earlier on in the Q&A, into a workable product in just less than 60 days, which is a real competitive advantage. And particularly, that helps with the larger customers. But overall, I don't see a meaningful change in customer mix in 2025. Yeah. And then on 3rd Eye, I mean, it's a great product. It's a differentiated product. We have great adoption of it, and there are a lot of opportunities to replicate that across the Terex portfolio. As a matter of fact, we are working on that right now.

We make concrete mixers, and we make utility trucks, and all of those, you know, have use cases and applications where we can deploy the 3rd Eye solution. So yeah, very much so a synergy opportunity for Terex across our entire portfolio.

Tim Thein (Managing Director and Analyst)

Thank you. And best wishes to you as well, Julie. Thank you.

Julie Beck (SVP and CFO)

Thank you.

Operator (participant)

That concludes our Q&A session. I will now turn the conference back over to Simon Meester for closing remarks.

Simon Meester (President and CEO)

All right. Thank you, Operator. If you have any additional questions, please follow up with Julie or Derek. Thank you for your interest in Terex. With all the weather, especially here on the East Coast, I hope you stay safe and warm. And with that, Operator, please disconnect the call.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.