Terex Corporation Earnings Call Highlights Merger Upside

Terex Corporation ((TEX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Terex Corporation’s latest earnings call carried a distinctly upbeat tone despite acknowledged headwinds. Management framed the REV Group merger as a step‑change in scale and resilience, pointed to robust bookings and backlog, highlighted sharply better free cash flow, and laid out a clear path to higher 2026 revenue and EBITDA, even as tariffs, interest costs and legacy softness weigh on near‑term EPS.

REV Group Merger Redefines Terex’s Scale

The company closed its merger with REV Group, adding roughly $2.5 billion of largely lower‑cyclic revenue and about $230 million of adjusted EBITDA. Terex created a new specialty vehicle segment, targeting $75 million of run‑rate synergies by 2028 and already embedding about $28 million of those savings into its 2026 EBITDA outlook.

Solid 2025 Earnings and Cash Generation

For 2025, Terex delivered EPS of $4.93, squarely in line with guidance, on EBITDA of $635 million and an 11.7% margin. Free cash flow surged 71% year over year to $325 million, driving cash conversion of 147%, while Q4 alone produced $1.12 EPS, $141 million of EBITDA and $172 million of free cash flow.

Bookings Momentum and Backlog Strength

Company‑wide Q4 bookings reached $1.9 billion on a pro forma basis, up 32% year over year and signaling healthy demand. Aerials orders jumped 46% to about $971 million, ES bookings rose 16%, MP bookings increased 24%, and sizeable backlogs in Environmental Solutions and Aerials underpin revenue visibility into 2026.

Environmental Solutions Delivers Standout Performance

Environmental Solutions posted Q4 sales of $428 million, up 14.1% pro forma, and full‑year revenue of roughly $1.7 billion, rising 12.7%. Segment profitability was a clear highlight, with Q4 operating margin at 18.5% and the year at 18.8%, supported by strong utility and refuse truck demand and growing digital waste solutions.

Materials Processing Margins Recover as Orders Rebuild

Materials Processing showed margin recovery even as revenue dipped, with Q4 sales of $428 million down 2.5% but modestly higher excluding divested clean businesses. Operating margin improved to 13.7%, the best of 2025, while bookings climbed 24% and backlog expanded, setting up a more constructive backdrop heading into 2026.

Capital Allocation and Balance Sheet Discipline

Management emphasized disciplined capital deployment, with roughly $118 million of 2025 CapEx aimed at automation and higher throughput. Terex returned $98 million to shareholders via dividends and buybacks and structured the REV merger to preserve balance sheet flexibility, expecting net leverage to improve in 2026 despite average debt of about $2.7 billion.

Operational Moves: Capacity Expansion and Hedging

To unlock its long‑dated orders, Terex plans a 20–30% capacity increase in utilities production in Waukesha over the next two years, with about half coming online in 2026. The company also hedged a significant portion of its first‑half steel exposure at 10–15% below forwards, partially shielding margins from raw material volatility.

Legacy Terex Volume Weakness Weighs on Margins

Beneath the pro forma growth, legacy Terex sales fell 11% in 2025, pressuring group margins. Full‑year operating margin declined 90 basis points versus 2024, driven by lower volumes in Aerials and Materials Processing and higher tariff costs, while MP full‑year sales were down 11.6% year over year.

Aerials Hit by Tariffs and Stubbornly Low Margins

The Aerials segment faced added Section 232 tariff impacts from August that could not be fully offset within the year, dragging on profitability. Management flagged an estimated $60 million incremental tariff headwind in 2026, with Q4 Aerials margin at just 2.6% and expectations for sales and margins to remain roughly flat next year.

Higher Interest and Tax Burdens Pressure EPS

Financing the ESG acquisition pushed 2025 interest and other expenses to $172 million, up $89 million year on year, with Q4 at $43 million. Looking ahead, pro forma 2026 interest and other costs are projected around $190 million and the effective tax rate is expected to rise to about 21%, both acting as headwinds to reported EPS.

REV Merger Dilution and Specialty Vehicle Execution Risk

The REV transaction is modestly dilutive to 2026 EPS by about 3%, mainly from a higher share count, even as it boosts scale and EBITDA. Management also noted that REV’s specialty vehicle backlog is roughly two years, requiring strong execution to ramp throughput and gradually normalize lead times toward a one‑year target.

Commodity and Tariff Uncertainty Lingers

Steel and broader raw material pricing remain a watchpoint despite near‑term hedging wins, as does the evolving tariff landscape that already hits Aerials. Management cautioned that macro and geopolitical shifts could further influence commodity costs and duties, introducing additional volatility around the company’s margin trajectory.

2026 Outlook: Modest Growth and Higher Profitability

For 2026, Terex guided to pro forma sales of $7.5–$8.1 billion, about 5% growth, and EBITDA of $930 million–$1.0 billion, roughly $100 million higher with a midpoint margin near 12.4%. EPS is projected at $4.50–$5.00 with 80–90% cash conversion and improving net leverage, underpinned by mid‑single‑digit growth in Environmental Solutions, high‑single‑digit gains in Materials Processing and Specialty Vehicles, and flat Aerials.

Terex’s call painted a picture of a company in transition, trading some near‑term EPS dilution and macro risk for greater scale, more recurring earnings and stronger cash generation. For investors, the story hinges on management’s ability to deliver REV synergies, execute on long backlogs and navigate tariffs and commodities, but the directional message was firmly constructive for 2026 and beyond.