Terex Earnings: Solid Third-Quarter Performance Leads Management to Slightly Raise 2023 Guidance

We raised our fair value estimate to $54 from $51, following third-quarter earnings. Our stronger 2023 sales outlook and tweaks to our long-term sales and margin forecast, in addition to the time value of money, all contributed to our fair value estimate increase.

Terex’s TEX consolidated sales increased to $1.2 billion (up 15% year on year), largely due to stronger sales volume and better price realization in the quarter. Operating margins expanded 190 basis points to 12.7%, as the company benefited from manufacturing efficiencies and better cost management.

Solid performance in the quarter led management to slightly raise its 2023 guidance. Terex increased its sales expectation by $50 million to $5.15 billion. Earnings per share was also raised, up 5 cents to $7.05. One item to note was management’s lowered expectation for operating margins in the aerial work platforms business. Guidance was lowered by 50 basis points to 13.3% for 2023. The company called out challenges in the utilities business, which has been affected by supply chain inefficiencies and unfavorable sales mix. We believe this was the main reason management’s operating margin guidance stayed flat compared with its previous guidance.

Turning to segment performance, the materials processing business increased sales by 18% year on year, while operating margins expanded 230 basis points to 16.9%. Sales were up thanks to stronger demand for Terex’s aggregates and concrete products. Profitability was driven by increased sales volume and favorable product mix, in addition to better cost management and manufacturing efficiencies.

Aerial work platforms saw revenue increase 13% year over year, because of improving supply chains, which helped get more products out to customers. Operating margin came in at 12.5%, up 290 basis points compared to the same period a year ago. Terex called out increased sales volume and cost management initiatives as key drivers to margin expansion in the quarter.