Terex (TEX)

Lifting and material handling equipment company Terex (NYSE:TEX) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 14.3% year on year to $1.39 billion. The company’s full-year revenue guidance of $5.4 billion at the midpoint came in 0.9% below analysts’ estimates. Its non-GAAP profit of $1.50 per share was 24.5% above analysts’ consensus estimates.

Company Overview

With humble beginnings as a dump truck company, Terex (NYSE:TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.

Automation that increases efficiencies and connected equipment that collects analyzable data have been trending, creating new sales opportunities for construction machinery companies. On the other hand, construction machinery companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the commercial and residential construction that drives demand for these companies’ offerings.

Companies competing against Terex include Caterpillar (NYSE:CAT), Komatsu (TYO:6201), and private company Liebherr Group.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Terex grew its sales at an impressive 11% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Terex’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1.9% over the last two years was well below its five-year trend. We also note many other Construction Machinery businesses have faced declining sales because of cyclical headwinds. While Terex grew slower than we’d like, it did do better than its peers.

This quarter, Terex’s revenue grew by 14.3% year on year to $1.39 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Terex’s gross margin is slightly below the average industrials company, giving it less room to invest in areas such as research and development. As you can see below, it averaged a 30% gross margin over the last five years. That means Terex paid its suppliers a lot of money ($70.03 for every $100 in revenue) to run its business.

Terex produced a 180% gross profit margin in Q3, up 159.4 percentage points year on year. Terex’s full-year margin has also been trending up over the past 12 months, increasing by 37.9 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Terex’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 9.7% over the last five years. This profitability was higher than the broader industrials sector, showing it did a decent job managing its expenses.

Looking at the trend in its profitability, Terex’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Terex generated an operating margin profit margin of 10.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Terex’s EPS grew at an astounding 76.2% compounded annual growth rate over the last five years, higher than its 11% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Terex’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Terex has repurchased its stock, shrinking its share count by 4.7%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Terex, its two-year annual EPS declines of 19.3% mark a reversal from its (seemingly) healthy five-year trend. We hope Terex can return to earnings growth in the future.

In Q3, Terex reported adjusted EPS of $1.50, up from $1.46 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Terex’s full-year EPS of $4.59 to grow 18.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Terex has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.7%, subpar for an industrials business.

Taking a step back, we can see that Terex’s margin dropped by 3.7 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Terex’s free cash flow clocked in at $130 million in Q3, equivalent to a 9.4% margin. This result was good as its margin was 2.2 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Terex hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 19.9%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Terex’s ROIC decreased by 2.3 percentage points annually over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Terex reported $509 million of cash and $2.59 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $600.3 million of EBITDA over the last 12 months, we view Terex’s 3.5× net-debt-to-EBITDA ratio as safe. We also see its $82 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Terex beat analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed and its revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 4.4% to $53.49 immediately after reporting.

Updated: December 3, 2025 at 10:23 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Terex, you should also grasp the company’s longer-term business quality and valuation.

Terex’s business quality ultimately falls short of our standards. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its organic revenue declined. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its cash profitability fell over the last five years.

Terex’s P/E ratio based on the next 12 months is 8.6x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $58.73 on the company (compared to the current share price of $49.68).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.