Terex Corporation Earnings Call Signals Resilient Growth

Terex Corporation ((TEX)) has held its Q1 earnings call. Read on for the main highlights of the call.

Terex Corporation’s latest earnings call struck a cautiously optimistic tone, blending strong operational momentum with clear-eyed acknowledgment of near-term pressures. Management highlighted double-digit pro forma growth, expanding margins in key segments, and a $7.1 billion backlog, while flagging tariff-driven margin compression, higher freight costs, and share dilution that temper headline gains.

Top-line growth and revenue mix

Terex reported Q1 sales of $1.7 billion, up 41% year over year on a reported basis, largely due to the REV merger. On a pro forma basis, revenue grew about 11%, with roughly 80% of 2025 pro forma revenue tied to North America and about 85% manufactured in the U.S., bolstering resilience against global volatility.

Earnings and EPS progress

Reported Q1 EPS reached $0.98, an 18% increase year over year, with operational EPS improving by about $0.05. Results were helped by a one-time tax benefit of roughly $0.10 per share, as the effective tax rate came in at 11% versus an expected full-year rate of 21%, inflating near-term profitability.

Strong bookings and backlog

Pro forma bookings in the quarter totaled $2.1 billion, delivering a robust 109% book-to-bill ratio that signals demand outpacing current shipments. The company closed Q1 with a $7.1 billion backlog, providing strong visibility across Materials Processing, Aerials, and Terex Utilities, and underpinning management’s medium-term growth plans.

Specialty Vehicles: rapid post-merger contribution

Specialty Vehicles delivered an early boost post-merger, growing about 20% year over year in just the two months after closing and generating $436 million of revenue in February and March. Segment EBITDA margin rose 160 basis points to 14.2%, and management sees high-single-digit sales growth for the full year with further margin expansion.

Materials Processing outperformance

Materials Processing posted sales of $419 million, up 18.3% year over year on a pro forma basis, or 12% excluding currency effects. Segment EBITDA margin climbed to 15%, up 310 basis points, driven by higher volumes, efficiency gains, and pricing, while backlog surged 53% to $594 million, underscoring durable demand.

Aerials bookings momentum and backlog

Aerials, branded as Arris, achieved a 132% book-to-bill ratio in Q1, building a backlog of about $1 billion even as quarterly sales rose a modest 4.2% to $469 million. Management expects sequential margin recovery in the second and third quarters and continues to target full-year price and cost neutrality despite tariff pressures.

Environmental Solutions and Utilities capacity build-out

Environmental Solutions delivered 3.3% sales growth, fueled by a ramp in Terex Utilities, while posting a strong 18% EBITDA margin. The company is investing to increase ladder truck capacity by 35% in Ocala and adding South Dakota capacity for S-180 pumpers, aiming for roughly 30% more Utilities capacity by the end of next year.

Integration and synergy progress

Management reported that the REV integration is on track, with all work streams at or ahead of plan and synergy capture progressing as expected. Terex is targeting about $28 million of synergies in 2026 and a $75 million run-rate within 24 months, building on a prior ESG integration that was completed ahead of schedule and above synergy targets.

Balance sheet and working capital improvements

Net working capital fell to 16.7% of sales from 26% a year ago, signaling better inventory and receivables management that should support cash generation. Net leverage is down to about 2.4 times, and the company expects interest and other expense around $190 million this year, while targeting free cash conversion of 80% to 90% of net income.

Reaffirmed 2026 guidance

Terex reaffirmed its 2026 outlook, calling for about 5% pro forma sales growth to a range of $7.5 billion to $8.1 billion and roughly $100 million of incremental pro forma EBITDA, implying about a 12.4% margin at the midpoint. The company guided 2026 EPS to $4.50 to $5.00 with an expected share count of about 115 million and assumes a 21% tax rate and interest expense of roughly $190 million.

Tariff headwinds and margin pressure

Companywide Q1 EBITA margin slipped 50 basis points to 9.9%, largely because tariffs were not present in the prior-year period and are now pressuring profitability. Aerials bore the brunt of these headwinds and, combined with seasonally low volumes, produced roughly breakeven EBITDA in the quarter, though management expects improvement as the year progresses.

Cash flow seasonality and near-term outflows

Free cash flow was a negative $57 million in Q1, broadly consistent with last year and reflecting the company’s typical back-half-weighted cash profile. Management is relying on higher second-half volumes and further working capital unwinds to deliver on its full-year cash conversion goals, making execution on backlog conversion crucial.

Share count dilution and EPS comparability

Shares outstanding climbed to 96.1 million in Q1 from 66.9 million a year earlier and are expected to average about 115 million from the second quarter onward. This dilution complicates year-over-year EPS comparisons and means investors must focus more on absolute earnings growth, margins, and cash generation rather than headline per-share metrics.

Specialty Vehicles backlog and throughput constraints

Specialty Vehicles carries roughly two years of backlog, reflecting strong demand for fire and emergency products but also highlighting production bottlenecks. Management emphasized the need to ramp factory throughput and invest in capacity, with some initiatives not meaningfully accretive until later this year or the fourth quarter, limiting near-term upside from this dense backlog.

Cost inflation risks

Terex flagged ongoing cost inflation across materials, energy, and especially inbound freight, which management views as the main incremental risk to margins. While many commodity and price-indexed exposures are already embedded in guidance, sudden spikes in freight costs remain a potential headwind that could pressure profitability if not offset by pricing or efficiency.

One-time tax benefit boosts Q1

The low 11% effective tax rate in Q1, driven by favorable one-time tax attributes, added about $0.10 to EPS and is not expected to recur. With management guiding to a full-year tax rate of around 21%, investors should adjust their models to strip out this temporary benefit when assessing the company’s underlying earnings power.

Forward-looking outlook and investor implications

Terex’s reaffirmed 2026 guidance leans on steady mid-single-digit sales growth, margin expansion to roughly the mid-12% range, and merger synergies that ramp through 2026, all underpinned by a $7.1 billion backlog and strong bookings. With leverage trending down, free cash conversion targeted at up to 90% of net income, and segment-level growth in Materials Processing, Specialty Vehicles, and Utilities, the company is positioning itself as a structurally stronger platform despite tariffs and freight volatility.

Terex’s earnings call painted a picture of a business gaining structural strength through integration and capacity investments, even as external headwinds weigh on near-term margins and cash flow timing. For investors, the story hinges on execution: if management can convert its robust backlog, realize synergies, and navigate tariffs and cost inflation, the reaffirmed 2026 targets suggest meaningful upside in earnings and cash generation over the next two years.