Terex Corporation Signals Momentum Despite Tariff Headwinds

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

Terex Corporation’s latest earnings call painted a generally upbeat picture, with management emphasizing strong operational momentum and successful integration of recent acquisitions despite macro uncertainty and tariff pressure. Executives pointed to broad-based top-line growth, expanding margins in key segments, and a record backlog as evidence that the company’s growth strategy is gaining traction.

Top-Line Growth and U.S.-Weighted Revenue Mix

Terex reported Q1 sales of $1.7 billion, up $505 million or 41% year over year, largely driven by the REV merger but also by roughly 10.8% pro forma growth. Management highlighted that about 80% of expected 2025 pro forma revenue will come from North America, with roughly 85% manufactured in the U.S., which they argue makes the portfolio more resilient in a volatile global environment.

Earnings and EPS Progress Amid Tax Tailwind

Quarterly EPS came in at $0.98, an 18% increase versus last year, with management noting about $0.05 of underlying operational improvement. The company also benefited from a one-time tax item that lowered the effective tax rate to 11% in Q1, adding around $0.10 to EPS and making the quarter stronger than what the full-year 21% tax rate will support.

Robust Bookings and Record Backlog

Pro forma bookings reached $2.1 billion in Q1, translating into a healthy 109% book-to-bill ratio and underscoring strong demand across the portfolio. The total backlog climbed to $7.1 billion, providing solid revenue visibility, with particular strength in Materials Processing, Aerials and Terex Utilities supporting management’s confidence in future growth.

Specialty Vehicles: Fast Start After REV Merger

Specialty Vehicles, acquired via the REV merger, posted roughly 20% year-over-year growth in the two months following deal close, generating about $436 million in revenue during February and March. EBITDA margin expanded by 160 basis points to 14.2%, and management now expects high-single-digit sales growth and continued margin gains for the full year as integration and throughput initiatives ramp.

Materials Processing Outperformance and Margin Expansion

The Materials Processing segment delivered standout results, with pro forma sales of $419 million, up 18.3% year over year, or 12% excluding currency effects. EBITDA margin jumped 310 basis points to 15%, supported by higher volumes, operational efficiency and pricing actions, while backlog surged 53% to $594 million, signaling sustained strength in demand.

Aerials Demand, Backlog and Path to Margin Recovery

Aerials, branded as Arris, recorded a 132% book-to-bill in the quarter and built a backlog of around $1 billion, while quarterly sales increased 4.2% to $469 million. The segment’s profitability was pressured by tariffs and seasonally low volumes, leading to breakeven EBITDA, but management expects sequential margin improvement in the second and third quarters and aims for price/cost neutrality for the full year.

Utilities and Environmental Solutions: Capacity-Fueled Growth

Environmental Solutions posted 3.3% sales growth, driven primarily by Terex Utilities ramping production, and delivered a strong 18% EBITDA margin in Q1. To capture rising demand, the company is boosting ladder truck capacity by 35% at its Ocala facility and expanding production in South Dakota, targeting roughly 30% more Utilities capacity by the end of next year.

Integration and Synergies from REV and ESG Deals

Management reported that the REV integration is progressing on or ahead of plan across all work streams, reinforcing confidence in the synergy outlook. Terex remains on track to realize about $28 million of synergies by 2026 and is targeting a $75 million run-rate within 24 months, while the earlier ESG integration was completed ahead of schedule and above synergy targets.

Balance Sheet, Working Capital and Cash Conversion

Net working capital improved sharply to 16.7% of sales from 26% a year earlier, freeing up balance-sheet capacity and helping reduce net leverage to roughly 2.4 times. Management reiterated expectations for interest and other expense of about $190 million this year and continues to guide for free cash flow equal to 80%–90% of net income over the full year.

Tariffs Weigh on Margins, Especially in Aerials

Despite strong volume, Q1 EBITA margin dipped 50 basis points year over year to 9.9%, with management pointing squarely at tariffs that were not present in the prior period as the main culprit. Aerials was hit hardest, as tariffs and seasonal volume weakness dragged segment profitability down to breakeven, reinforcing the importance of planned price and cost actions.

Cash Flow Seasonality and Near-Term Outflows

Terex reported a free cash outflow of $57 million in the first quarter, in line with typical seasonality where cash generation skews toward the second half of the year. Management continues to rely on higher back-half volumes and further working capital reductions to drive cash conversion, signaling that investors should expect stronger cash metrics later in the year.

Share Count Dilution and EPS Comparability

Shares outstanding rose to 96.1 million in Q1 from 66.9 million a year ago and are expected to average about 115 million for the remainder of the year. This dilution complicates year-over-year EPS comparisons and means investors need to focus more on absolute earnings growth, margins and cash flow rather than simple per-share metrics.

Specialty Vehicles Backlog Depth and Capacity Limits

Specialty Vehicles holds an unusually deep backlog of roughly two years, reflecting strong demand from municipal, industrial and emergency customers. However, management acknowledged that factory throughput and targeted capacity investments will govern how quickly that backlog converts to revenue, with some projects not becoming meaningfully accretive until later this year or into the fourth quarter.

Cost Inflation Risks Focused on Freight

Terex flagged continued inflationary pressures in materials, energy and freight, though most commodity and CPI-related costs are already baked into its guidance. The biggest variable risk remains inbound freight, where unexpected spikes could pressure margins and require further pricing or productivity actions to stay on track with profitability targets.

Non-Recurring Tax Benefit Skews Q1 EPS

The company’s Q1 effective tax rate of 11% was driven by favorable one-time attributes that are not expected to recur, helping lift EPS by roughly $0.10. Management reminded investors that the full-year tax rate should normalize at about 21%, implying that future quarters will not enjoy the same tax-driven boost and making underlying operational performance the more relevant metric.

Forward-Looking Guidance and 2026 Outlook

Terex reaffirmed its 2026 guidance, projecting pro forma sales growth of around 5% to $7.5–$8.1 billion and a roughly $100 million increase in pro forma EBITDA to $930 million–$1.0 billion, implying about a 12.4% margin at the midpoint. The outlook assumes around $28 million of merger synergies in 2026, interest and other expense of roughly $190 million, a 21% tax rate and EPS between $4.50 and $5.00 on an expected share count of about 115 million.

Terex’s earnings call underscored a company in transition but moving in the right direction, leveraging acquisitions, a U.S.-centric footprint and strong bookings to build a sizable backlog. While tariffs, freight costs, dilution and seasonal cash outflows remain real headwinds, management’s reiteration of medium-term targets and visible progress on integration and margins suggest that the growth story is intact for patient investors.