TEREX CORP (TEX)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered adjusted EPS of $0.83 on $1.23B sales; EPS beat consensus while revenue modestly missed, driven by strong execution in Environmental Solutions (ES) offset by volume/mix headwinds in Aerials and Materials Processing (MP) . EPS consensus was $0.57*, revenue $1.253B*, EBITDA $110M* versus actual $0.83, $1.229B, $108M, respectively .
• ES was one-third of sales with 19.4% adjusted operating margin; MP and Aerials margins were pressured by production resets and under-absorption (~$0.31/share impact) but expected to improve sequentially beginning Q2 .
• Full-year 2025 outlook maintained: net sales $5.3–$5.5B, EPS $4.70–$5.10, EBITDA ~$660M, segment OP margin ~12%, tax ~20%, interest/other ~$175M; ES sales outlook raised to up high single digits versus prior mid single digits .
• Book-to-bill was 124% (Aerials 144%), backlog rose to $2.6B (+13% q/q), and liquidity stood at $1.1B; management emphasized tariff mitigation and price/cost neutrality, framing the narrative and likely stock reaction catalysts around maintained guidance and ES strength despite tariff uncertainty .

What Went Well and What Went Wrong

What Went Well

• ES segment execution: ~$399M sales, adjusted OP margin 19.4% (up ~420 bps YoY pro forma); throughput records and early synergies supported performance .
• Robust commercial metrics: Book-to-bill 124% (Aerials 144%) and backlog $2.6B (+13% q/q), setting up sequential growth into Q2 .
• Management tone on resilience and footprint: ~75% of 2025 U.S. machine sales produced in the U.S. and additional USMCA benefit; “Our overall Q1 financial performance exceeded our initial outlook… Environmental Solutions… accounted for one-third of our revenue” .

What Went Wrong

• Volume/mix compression: Net sales down 4.9% YoY; Aerials -27.8% and MP -26.5% YoY; consolidated OP margin fell to 5.6% (9.1% adjusted) from 12.2% (12.6% adjusted) .
• Under-absorption impact: deliberate production cuts in Aerials/MP drove ~550 bps margin impact and ~$0.31/share EPS headwind in Q1 .
• Tariff headwinds: management embedded ~$0.40 full-year EPS headwind, mostly raw material from China; while assuming de-escalation later in 2025, uncertainty remains .

Financial Results

Segment performance (Q1 2025 vs Q1 2024):

Key KPIs:

Notes: GAAP-to-non-GAAP reconciliations detail adjustments including purchase price accounting, litigation, severance/accelerated vesting, and tariff-related items .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered earnings per share of $0.83 on sales of $1.2 billion and return on invested capital of 15%.… Environmental Solutions… earned 19.4% operating margin” — Simon Meester, CEO .
• “Our operating margin was 9.1%… book-to-bill was 124%… backlog remains strong at $2.6 billion… factory under-absorption… was approximately $0.31 per share in Q1” — Jennifer Kong-Picarello, CFO .
• “Our strategy is to maintain price cost neutrality… we have taken some surcharges in certain areas already… priority… is to mitigate through supply chain” — CEO .
• “We expect Aerials to return to double-digit operating margins in the second quarter as we ramp up production” — CFO .

Q&A Highlights

• ES margins and sustainability: Q1 strength driven by throughput and early synergies; expect moderation from record Q1 levels due to one-offs and ramp investments .
• Tariff assumptions and mitigation: ~$0.40 EPS headwind concentrated in raw materials from China; assumed ~50% de-escalation; USMCA-qualified goods remain tariff-free; surcharges as needed .
• Aerials margin trajectory: Normal seasonal volume ramp and removal of under-absorption drive return to double-digit OP margins in Q2; Q3 may be high-single digit with normal decrementals in Q4 .
• MP cadence and backlog: Backlog at ~3 months, bookings favorable; gradual recovery in North America on replacement demand; caution on tariff confidence effects .
• Steel/inputs: ~70% HRC, ~50% hedged at favorable rates; purchase price adjustments of ~$10M in ES .

Estimates Context

Notes: Values retrieved from S&P Global. EPS beat; revenue slight miss; EBITDA slight miss. The company maintained FY guidance despite tariff headwinds, implying estimate stability near-term with potential upward bias in ES segment and margin recovery in Aerials/MP from Q2 .

Key Takeaways for Investors

• ES is transforming cyclicality: one-third of sales, high-teens margins, backlog ~8 months; underpinning FY guide resilience .
• Near-term margin recovery: removal of under-absorption and seasonal ramp should lift Aerials to double-digit margins in Q2; MP margins to improve sequentially through FY25 .
• Guidance credibility: maintained EPS $4.70–$5.10 with explicit ~$0.40 tariff headwind and raised ES sales outlook; watch tariff path vs assumed de-escalation .
• Commercial strength: Book-to-bill 124% (Aerials 144%) and backlog up 13% q/q set positive Q2/Q3 trajectory, supporting estimate stability .
• Capital allocation: $0.17 dividend and buybacks reduce share count (~66M guide), modestly accretive to EPS .
• Trading setup: EPS beat amid revenue/margin pressure and maintained guide; ES strength offsets macro/tariff uncertainty—monitor tariff headlines, ES throughput, Aerials margin prints in Q2 for stock reaction catalysts .
• Medium-term thesis: ESG synergy pipeline (> $25M run-rate by 2026), digital product initiatives, and U.S.-centric manufacturing footprint provide structural advantages across cycles .