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TC

TEREX CORP (TEX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered mixed but better‑than‑feared results: revenue rose 7.6% Y/Y to $1.487B with GAAP EPS $1.09 and adjusted EPS $1.49; operating margin was 8.7% GAAP and 11.0% adjusted, reflecting ES outperformance offset by Aerials headwinds and tariffs .
  • Against S&P Global consensus, Terex beat on revenue and adjusted EPS but was below EBITDA: revenue $1.487B vs $1.440B*, adjusted EPS $1.49 vs $1.39*, EBITDA $182M vs $193M*; management maintained FY EPS $4.70–$5.10 and trimmed FY EBITDA outlook to ~$640M from ~$660M due to tariffs and mix *[GetEstimates Q2 2025].
  • Environmental Solutions (ES) remained the growth/earnings engine (Q2 adj. OP margin 19.1%); MP improved sequentially; Aerials saw weaker mix (independents cautious) and tariff pressure; free cash flow was strong at $78M (108% conversion) .
  • Capital allocation/tone: new $150M buyback authorization, dividend maintained ($0.17), term loan repricing lowers cash interest by ~$3M/year; FY interest guidance cut to ~$170M and tax rate to ~17.5% (from 20%)—offsets some EBITDA pressure .

What Went Well and What Went Wrong

  • What Went Well

    • ES segment again outperformed: sales $430M (+12.9% pro forma) and adj. OP margin 19.1%, with ESG throughput and Utilities execution; management sees strong H2 momentum though margins moderate slightly on mix .
    • Sequential improvement in MP: Q2 OP margin 10.8% (adj. 12.7%), +270 bps Q/Q, with cost control and pricing offsetting tariffs; bookings +24% Y/Y supported by aggregates in US/India .
    • Cash generation and balance sheet flexibility: Q2 free cash flow $78M (108% conversion), liquidity $1.2B, new $150M buyback; CFO: “strong cash flow generation… supporting balanced capital allocation” .
    • Quote: “The power of our evolving portfolio was evident… strong performance in Environmental Solutions offset industry‑wide headwinds in Aerials.” – CEO Simon Meester .

  • What Went Wrong

    • Aerials weakness: sales down 17% Y/Y to $607M; OP margin 7.6% (adj. 8.0%), pressured by lower independent rental capex, unfavorable mix, and tariffs; H2 mix/tariff headwinds to persist .
    • EBITDA outlook reduced: FY EBITDA trimmed to ~$640M (from $660M previously) on higher tariff drag ($0.50 FY headwind vs ~$0.40 prior) and Aerials mix; mitigation ramps into Q4 .
    • Gross/operating margin compression vs prior year: Q2 gross margin 19.6% GAAP (21.4% adj.) vs 23.8% last year; OP margin 8.7% GAAP (11.0% adj.) vs 14.0% (14.1% adj.) as lower legacy volumes and tariffs weighed .

Financial Results

Overall P&L vs prior periods

MetricQ2 2024Q1 2025Q2 2025
Revenue ($B)$1.382 $1.229 $1.487
GAAP EPS ($)$2.08 $0.31 $1.09
Adjusted EPS ($)$2.16 $0.83 $1.49
Gross Margin % (GAAP)23.8% 18.7% 19.6%
Gross Margin % (Adj.)23.8% 20.6% 21.4%
Operating Margin % (GAAP)14.0% 5.6% 8.7%
Operating Margin % (Adj.)14.1% 9.1% 11.0%

Estimate comparison (S&P Global consensus vs actual)

Metric (Q2 2025)ConsensusActualSurprise
Revenue ($B)$1.440*$1.487 +$0.047B / +3.3%*
Adjusted EPS ($)$1.39*$1.49 +$0.10 / +7.2%*
EBITDA ($M)$192.9*$182 -$10.9 / -5.6%*

Values marked with * retrieved from S&P Global.

Segment performance

SegmentQ2 2024Q1 2025Q2 2025
Aerials Net Sales ($M)$732 $450 $607
Aerials OP Margin % (GAAP / Adj.)15.7 / 15.7 0.4 / 3.0 7.6 / 8.0
MP Net Sales ($M)$499 $382 $454
MP OP Margin % (GAAP / Adj.)15.4 / 15.6 9.4 / 10.0 10.8 / 12.7
ES Net Sales ($M)$152 (pro forma) $399 $430
ES OP Margin % (GAAP / Adj.)12.5 / 12.5 14.0 / 19.4 14.2 / 19.1

KPIs

KPIQ2 2025
Bookings ($B)$1.1; +19% Y/Y (pro forma); book‑to‑bill 73%
Backlog ($B)$2.2
Free Cash Flow ($M)$78; conversion 108%
Liquidity ($B)$1.2
ROIC (%)12.3%
Capex in Quarter ($M)$24
Shareholder Returns$75M YTD; 1.4M shares at $38.74 avg; new $150M authorization

Non‑GAAP adjustments note: Q2 adjusted EPS excludes restructuring, deal-related costs, purchase price accounting, and other items totaling +$0.40 per share vs GAAP; adjusted operating margin adds back ~$35M to OP (restructuring, deal, PPA) .

Guidance Changes

MetricPeriodPrevious Guidance (Q1’25)Current Guidance (Q2’25)Change
Net SalesFY 2025$5.3–$5.5B $5.3–$5.5B Maintained
Segment Operating MarginFY 2025~12% ~12% Maintained
EBITDAFY 2025~$660M ~$640M Lowered
EPS (Adj.)FY 2025$4.70–$5.10 $4.70–$5.10 Maintained
Free Cash FlowFY 2025$300–$350M $300–$350M Maintained
FCF ConversionFY 2025~120% >120% Raised
Interest & Other ExpenseFY 2025~$175M ~$170M Lowered
Effective Tax RateFY 2025~20% ~17.5% Lowered
Aerials Sales OutlookFY 2025Down low double‑digits Down low double‑digits Maintained
MP Sales OutlookFY 2025Down high single‑digits Down high single‑digits Maintained
ES Sales OutlookFY 2025Up high single‑digits Up low double‑digits Raised
Tariff AssumptionsFY 2025Assumes easing of recent tariffs Assumes tariffs largely remain at current rates; EU reciprocal at 15% Tightened (more conservative)

Additional cadence: Management expects Q4 EPS > Q3 EPS (by ~10–20%) as tariff mitigation flows through and MP margins step up despite lower Aerials volume .

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Portfolio strategy & ES integrationESG accretive in Q4; 21.9% adj. OP margin ES ~1/3 of sales; resilient margin profile ES adj. OP margin 19.1%; synergies ahead of plan; Utilities order via ESG relationship Positive, synergy momentum
Tariffs & mitigationNot explicitMonitoring tariffs; majority US-made limits exposure Net tariff headwind ~$0.50 FY; EU reciprocal 15%; mitigation via sourcing, engineering, pricing; footprint mix Headwind peaked near term; mitigation ramps
Aerials demand/mixChannel adjustments impact; Q4 AWP OP 3.1% Book‑to‑bill 144%; low production reset Independents cautious; mix unfavorable; Q3 OP mid‑single‑digit step down vs Q2; ~4+ months backlog coverage Pressured H2; nationals strong
MP cycleChannel adjustments/weak Europe Volume/mix reset; margins to improve in Q2 Sequential margin gains; bookings +24%; Europe showing early recovery signs Gradual improvement
Macro & policy——“Big beautiful bill”: 100% bonus depreciation, infra/defense spend; two‑speed US, Europe weak near term Mixed macro tailwinds
Digital/technology——Third Eye SaaS expanded to Mixers/Utilities; broader digital roadmap Growing SaaS content

Management Commentary

  • CEO: “We delivered EPS of $1.49 on sales of $1.5 billion with an operating margin of 11%. The power of our evolving portfolio was evident… strong performance in Environmental Solutions offset industry-wide headwinds in Aerials” .
  • CFO: “We generated $78 million of free cash flow in Q2… We are also announcing the authorization of a new $150 million share buyback program… [and] expect our Q4 EPS to be higher than Q3 due to tariff mitigation and higher Q4 MP margins” .
  • On ES strength: “ES delivered a 19.1% operating margin… Utilities benefited from positive customer and product mix and improved operational execution” .
  • On tariffs: “We estimate the overall net impact of tariffs to be roughly $0.50 for the full year… we are working… re‑engineering/insourcing and other cost‑out actions; pricing is one tool in the toolbox” .

Q&A Highlights

  • ES margins sustainability: H2 ES margins to moderate ~100 bps vs H1 on mix; operational efficiencies continue .
  • Tariff mitigation specifics: Pulled forward supply; supplier negotiations; alternative sourcing/insourcing; pricing; expect Q4 mitigation to outweigh Q3 cost timing .
  • Aerials outlook: Q3 OP “mid single digit step down” vs Q2 on tariffs, lower sequential volume, and mix; ~low 4 months backlog coverage; nationals strong, independents weaker .
  • MP trajectory: Sequential margin improvement expected with better absorption and geographic mix; bookings +24% Y/Y; early EU green shoots .
  • Steel/232: Minimal raw steel inflation impact; ~70% HRC, ~50% H2 hedged at favorable rates; imported parts within $0.50 tariff guide .

Estimates Context

  • Q2 beat on revenue and adjusted EPS, miss on EBITDA vs S&P Global: revenue $1.487B vs $1.440B*, adjusted EPS $1.49 vs $1.39*, EBITDA $182M vs $192.9M*; 9 revenue and 11 EPS estimates *[GetEstimates Q2 2025].
  • FY guidance implies consensus EPS likely steady to modestly recalibrated: EBITDA lower offset by interest/tax cuts; ES sales outlook raised; Aerials/MP unchanged—expect estimate dispersion to focus on H2 tariff cadence and Aerials mix .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • ES is the structural earnings buffer and growth vector; durability of ~high‑teens adjusted OP margins underpins through‑cycle profile even as Aerials normalizes .
  • Near‑term stock drivers: H2 tariff mitigation execution (Q4 > Q3 EPS), ES momentum vs mix moderation, and evidence of Aerials mix stabilization as independents re‑engage .
  • FY guide quality improved on interest/tax reductions and ES raise; EBITDA trim reflects conservative tariff stance; risk‑reward hinges on MP sequential improvement and tariff flow‑through .
  • Capital returns supportive (new $150M buyback; $0.17 dividend) with balance sheet flexibility (liquidity $1.2B; term loan repriced, ~$3M annual cash interest savings) .
  • Portfolio simplification and synergy capture continue (ESG integration ahead of plan; announced divestiture of Tower/RT Cranes post‑quarter) supporting lower cyclicality thesis .
  • Watchlist: Aerials pricing/mix, tariff policy evolution (EU 15% reciprocal, 232 steel), and US project cadence under 100% bonus depreciation into 2026 .