Terex Q2 2025 Earnings Report

Terex EPS Results

• Actual EPS: $1.49
• Consensus EPS: $1.44
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: $2.16

Terex Revenue Results

• Actual Revenue: $1.49 billion
• Expected Revenue: $1.46 billion
• Beat/Miss: Beat by +$30.51 million
• YoY Revenue Growth: +7.60%

Terex Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 8:30AM ET

Terex (NYSE:TEX) manufactures and sells aerial work platforms and materials processing machinery worldwide. It operates in two segments, Materials Processing (MP) and Aerial Work Platforms (AWP). The MP segment designs, manufactures, services, and markets materials processing and specialty equipment, includes crushers, washing systems, screens, trommels, apron feeders, material handlers, pick and carry cranes, rough terrain cranes, tower cranes, wood processing, biomass and recycling equipment, concrete mixer trucks and concrete pavers, conveyors, and related components and replacement parts under the Terex, Powerscreen, Fuchs, EvoQuip, Canica, Cedarapids, CBI, Simplicity, Franna, Terex Ecotec, Finlay, ProAll, ZenRobotics, Terex Washing Systems, Terex MPS, Terex Jaques, Terex Advance, ProStack, Terex Bid-Well, MDS, and Terex Recycling Systems brands. Its products are used in construction, infrastructure, and recycling projects; quarrying and mining, and material handling applications; maintenance applications to lift equipment or material; and landscaping and biomass production industries. The AWP segment designs, manufactures, services, and markets aerial work platform equipment, utility equipment, and telehandlers under the Terex and Genie brands. Its products include portable material lifts, portable aerial work platforms, trailer-mounted articulating booms, self-propelled articulating and telescopic booms, and scissor lifts, as well as related components and replacement parts for construction and maintenance of industrial, commercial, institutional, and residential buildings and facilities, transmission and distribution lines, construction and foundation drilling applications, and other commercial operations, as well as in tree trimming and various infrastructure projects. The company offers financing solutions to assist customers in the rental, leasing, and acquisition of its products. Terex Corporation was founded in 1933 and is based in Norwalk, Connecticut.

Terex Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Our Q2 EPS was $1.49 with an 11% operating margin and generated $78 million in free cash flow, representing 108% cash conversion.
• Positive Sentiment: We maintained full-year EPS guidance of $4.70–$5.10 per share, expecting stronger Environmental Solutions performance to offset aerials headwinds.
• Negative Sentiment: We estimate a net €0.50 per share tariff impact for 2025 and face ongoing uncertainty despite mitigation efforts through sourcing and supplier actions.
• Positive Sentiment: Infrastructure legislation with 100% bonus depreciation, coupled with resilient waste, recycling and utilities end markets, supports equipment demand despite high interest rates.
• Positive Sentiment: ESG acquisition synergies are ahead of schedule, leveraging the Third Eye digital platform to boost SaaS revenue streams and cross-sell opportunities.

Presentation

[Operator]

Greetings, and welcome to the Terex Second Quarter twenty twenty five Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Everett, Vice President, Investor Relations.

[Derek Everitt, VP, IR at Terex Corporation]

Good morning, and welcome to the Terex second quarter twenty twenty five earnings conference call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer and Jennifer Kong, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by a Q and A.

[Derek Everitt, VP, IR at Terex Corporation]

Please turn to Slide two of the presentation, which reflects our safe harbor statement. Today's conference call contains forward looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in detail in the earnings material and in our reports filed with the SEC. On this call, we will be discussing non GAAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance. Reconciliations for these non GAAP measures can be found in the conference call materials.

[Derek Everitt, VP, IR at Terex Corporation]

Please turn to Slide three, and I'll turn it over to Simon and Easter.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. I want to start by thanking our global team for their continued focus on our customers and our operational performance while navigating through a very dynamic environment. Some of our businesses have more tailwinds or headwinds than others, but our overall performance in the second quarter was in line with expectations. We delivered earnings per share of $1.49 on sales of $1,500,000,000 with an operating margin of 11%.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

In addition, we achieved $78,000,000 in free cash flow, a significant increase compared to this time last year, representing a cash conversion of 108%. The power of our evolving portfolio was evident in the quarter as strong performance in Environmental Solutions offset industry wide headwinds in Aerials. Materials Processing executed well, delivering strong sequential growth and margin improvement. Looking ahead, we are maintaining our full year EPS outlook of $4.7 to $5.1 We expect stronger ES performance in the second half compared to our previous outlook as both ESG and Terex utilities are well positioned with healthy backlog, operational momentum and synergies ramping up ahead of schedule. We are assuming independent rental customers will remain cautious with their CapEx deployment impacting the sales mix and margin outlook for aerials, while we continue to expect MP to improve margins in the second half compared with the 2025.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

With respect to tariffs, we fully understand that things change quickly and it is difficult to predict where final rates will eventually end up. Our outlook assumes that tariffs broadly remain at current rates and reasonable deals are made with key countries. To that point, let's move to Slide four to discuss that in a bit more detail. As we communicated last quarter, we are well positioned from a manufacturing footprint standpoint as about 75% of our twenty twenty five U. S.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Machine sales are expected to be generated by products that we produce in at least one of our 11 U. S. Manufacturing facilities. Environmental Solutions' full line of refuse collection vehicles, utility vehicles, compactors and digital solutions are all designed and made in America. Genie manufacturers the vast majority of the Booms and Scissors sold in The U.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

S. In Washington state, representing about 70% of its U. S. Sales. Airline handlers manufactured in Monterrey, Mexico, approximately 20% of its U.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

S. Sales, qualify under the USMCA exemption. Approximately 40% of MP's twenty twenty five U. S. Sales, including cement mixers and certain environmental and aggregate products, are also made in The United States.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Our primary aggregates product lines are produced in Northern Ireland, is part of The United Kingdom. As we anticipated, The UK reached agreement on the 10% tariff rate consistent with our previous outlook. Approximately 85% of MP's 2025 U. S. Sales are generated by products made in The U.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

S. Or The U. K. Cranes and material handlers are manufactured in the European Union and represent less than 10% of MPE's U. S.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Sales. Like other industrial companies, we have a global supply base and are exposed to tariffs mostly on imported material. We are working closely with our suppliers and executing our mitigation strategy, but we are seeing direct and indirect tariff related inflation on materials. Based on our current outlook, we estimate the overall net impact of tariffs to be roughly €0.50 for the full year, which includes the recently announced 15% reciprocal tariff on the European Union. We will continue to follow the ongoing trade negotiations for all of our key markets.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Moving to Page five. Macro crosscurrents are impacting end market demand and channel dynamics. We view the big beautiful bill as largely positive as key provisions, particularly the reinstatement of 100% bonus depreciation to be supportive of equipment demand and increased U. S. Industrial activity.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Moreover, the bill includes new bonus depreciation for qualified production property, which marks the first time that newly constructed nonresidential real estate can benefit from 100% bonus depreciation, which we believe will support increased U. S. Manufacturing CapEx. The bill also includes significant allocations to construction spending, particularly for border infrastructure and defense. On encounter to these policy tailwinds are persistently high interest rates and tariff related uncertainty that continue to impact capital decisions in certain areas.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

A building strength of the tariffs portfolio is the diversification of our end markets. Waste and recycling now represents approximately 30% of our global revenue and is characterized by low cyclicality and steady growth. Utilities is about 10% and growing due to the need to expand and strengthen the power grid. About 15% of our business is related to infrastructure where significant investments are being made in The United States and around the world. These three markets representing more than half of our revenue are highly resilient and less exposed to macroeconomic or geopolitical dynamics.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

General construction, which in the past has represented the majority of our end markets is now less than onethree. On balance, we continue to see a two speed profile in U. S. Construction with strength in large projects and infrastructure and softness in local private projects persisting through the 2025. Turning to Europe, we are seeing a generally weak economic and construction environment in the near term with a more encouraging outlook for infrastructure and industrial related spending growth in the medium to longer term.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

We're also encouraged by increasing adoption of our products in emerging markets such as India, Southeast Asia, The Middle East and Latin America. Turning to Slide six. Around this time last year, when we announced the ESG acquisition, we started to communicate the opportunity to unlock increasing synergies across Terex. I'm pleased to report that we are running well ahead of our initial targets and are finding more opportunities for leverage across our portfolio of businesses. A great example of creating synergy value extending the capabilities of ESG's Third Eye digital platform to advance mixer and Terex utilities.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

In the second quarter, we launched modules that provide vehicle operators enhanced situational awareness for better maneuverability and safety. The system also provides fleet operators real time visibility into driver performance, chassis and body activity and equipment status, which reduces operating and liability costs. Third Eye generates an important and growing subscription or software as a service based revenue stream for ESG, and we're excited about the prospects for new digital revenue streams across the Terex portfolio. The middle picture is a Terex Utilities High Ranger bucket truck, which was part of a significant order we received through a historical ESG customer. Relationships matter and this recent order is a great example of how strong customer relationships in one area can open doors for other parts of the business.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

As a result, Derek's Utilities is building 80 plus bucket trucks and digger derricks for a customer that was not in their previous sales plan. We will continue to explore incremental opportunities as we leverage relationships and channels across the group. Finally, the sourcing savings are starting to build up as well, helping offset tariff and inflationary pressure. So far, the teams have leveraged our increased scale to secure better rates and terms in categories such as steel fabrications, hardware, consumables and transportation. There's more opportunity added as we systematically work through all areas of our bill of materials.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Overall, I'm very pleased with the work of our integration teams and look forward to unlocking considerably more synergies going forward. And with that, I'll turn it over to Jen.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Thank you, Simon, and good morning, everyone. Let's look at our Q2 financial results on Slide seven. Our overall performance in the quarter was in line with our expectations despite tight monetary policies, changing trade policies and geopolitical tensions. This is a testament to the strength of the tariff portfolio that headwinds faced by Aerials were offset by ongoing strong performance in environmental solutions supported by MP delivering on the planned sequential improvement. Total net sales of $1,500,000,000 grew 8% year over year or 7% at constant exchange rate.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Excluding ESG, our legacy sales declined by 12% or 13% excluding the impact of FX, consistent with our expectations. Our operating margin was 11%, down three ten basis points year over year, consistent with our planned sequential improvement of 190 basis points. Stronger ES margins offset lower than expected margins in areas. Excluding ESG, legacy operating margin declined by five sixty basis points driven by volume, tariffs and mix, partially offset by SG and A reduction. Interest and other expenses were $44,000,000.29000000 dollars higher than last year due to interest on ESG acquisition financing.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

The second quarter effective tax rate was 18.3%, about 170 basis points better than planned due to net favorable discrete items residing from utilization of certain non U. S. Tax attributes. EPS for the quarter was $1.49 which includes a $03 benefit from the favorable tax rate. EBITDA was $182,000,000 up 12.2% of sales.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

We generated $78,000,000 of free cash flow in Q2, which was $35,000,000 better than last year despite lower earnings due to better working capital performance. ESG generated cash well above the interest expense associated with the acquisition financing. We continue to execute our capital allocation strategy, returning value to shareholders while investing for longer term organic growth. Please turn to Slide eight to review our segment results, starting with Aerial. Sales of $6.00 $7,000,000 were consistent with our expectations in total, but the customer mix was more heavily weighted to our national customers than we anticipated.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Independent rental customers are more exposed to smaller interest rate sensitive projects compared to the national for benefiting from that greater exposure to the larger project. Aerial's operating margin improved 500 basis points sequentially from better manufacturing absorption, but was about 200 basis points lower than we expected, largely because of customer mix. Turning to Slide nine. MP sales of $434,000,000 were 9% lower than last year, bottom line without expected step up from Q1. We continue to see high fleet utilization rates in The United States and deal with spot levels normalize.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

However, macro uncertainty and high interest rates remain a headwind for rent to own conversion, and the European market remains weak, although showing early signs of recovery. NP generated 12.7% of operating margin in Q2, in line with expectations, as cost controls and pricing actions largely offset tariff impact. This was a February basis point sequential quarter over quarter margin improvement from the 10% lower in Q1. Most of the improvement was in the aggregates vertical, while the cranes and handling businesses remain challenging. Please turn to Slide 10 to review Environmental Solutions.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Our ES segment had another great quarter, generating four thirty million dollars of sales with 12.9% year over year growth on a pro form a basis and 8% sequential growth versus Q1. The strong growth was driven by improved throughput and delivery of Refused Collection Vehicles and Utilities Trust. CES delivered a 19.1 operating margin, representing a two thirty basis point improvement on a pro form a basis compared to last year. Utilities benefited from positive customer and product mix and improved operational execution. I look forward to consistent strong performance from this segment.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Please turn to Slide 11. We have strong liquidity and a flexible capital structure with the right mix of secured and unsecured debt and variable versus fixed rate. As stated previously, we can prepay or reprice a significant portion of the debt, and we do not have any maturities until 2029. We ended the second quarter with $1,200,000,000 of liquidity consistent with our outlook. We plan to deleverage in the second half of the year as we generate increased cash flow from the operation.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

We will also continue to invest in our businesses to fuel organic growth and profitability improvement. Returning capital to shareholders remains a priority. In the second quarter, we repurchased $21,000,000 of Terex stock, increasing our first half total to $53,000,000 We are also announcing the authorization of a new $150,000,000 share buyback program with $33,000,000 remaining at the end of Q2 from the previous authorization. The new authorization will provide us flexibility to take advantage of market conditions when appropriate. In addition to the buyback, we paid $11,000,000 in dividends in the quarter.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Parex is in a strong financial position to invest in our business and execute our strategic initiatives while returning capital to shareholders. Turning to bookings and backlog on Slide 12. Our bookings trends have returned to normal seasonal patterns supported by a 19% year over year pro form a growth in the quarter. Average booking grew 7% year over year with a sequential decline consistent with historical seasonality. Despite the macro uncertainty, MP bookings grew 24% year over year, driven by aggregate, which saw a positive demand uptick in The United States and India.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

In Environmental Solutions, bookings reflect a return to normal seasonal ordering pattern, and the healthy backlog provides strong forward visibility. Our overall tariff backlog sits at $2,200,000,000 and supports our second half outlook. Now turning to Slide 13 for our 2025 outlook. We are operating in a complex environment with many macroeconomic variables and geopolitical uncertainty, and results could change negatively or positively. We're maintaining our full year EPS outlook of $4.7 to $5.1 which now includes 50% of net tariff impact.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

We continue to expect full year 2025 sales of between 5,300,000,000 and $5,500,000,000 representing between 200 to $400,000,000 higher sales than prior year due to the acquisition growth of ESG more than offsetting lower legacy sales. We continue to expect segment operating margin of approximately 12% resulting from stronger ESG margin and planned sequential improvement from MP, which will help offset second half headwind scenarios, including the impact of tariffs. We now expect interest and other expenses of about $170,000,000 and an improved effective tax rate of approximately 17.5% for the full year. From a quarterly perspective, as opposed to our historical cadence, this year, we expect our Q4 EPS to be higher than Q3 due to the ramp up of tariff mitigation actions and higher Q4 margins at MP, which more than offset the sequentially lower sales volume in ARREST. We continue to expect a significant increase in free cash flow compared to 2024, anticipating between $300,000,000 and $350,000,000 in 2025, driven by working capital reduction and a full year of ESG cash generation, while investing in our businesses with expected CapEx of approximately $120,000,000 Looking at our segment, we are maintaining our R and M sales expectations and increasing our sales outlook for ES.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

In our end, we expect full year sales to be in line with our previous outlook of down low double digits. We also expect the unfavorable customer mix dynamics that we saw in Q2 persist in the second half. This, coupled with the timing of tariff impact, will put pressure on ARR's margins in the second half. In MP, our backlog coverage as well as the underlying machine utilization rates, part consumption and quote activity gives us confidence in our down high single digit outlook for the year. We expect MP to achieve full year decremental margins well within our 25% target.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

ES had a great first half, and we expect the strong momentum to continue into the second half. We're increasing our full year sales outlook again this quarter and are now expecting full year sales to be up low double digits. We expect margins to moderate slightly in the second half due to customer and product mix. And with that, I'll turn it back to Simon.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thanks, Jen. I will now turn to Slide 13. Terex is well positioned to navigate the current dynamic environment and deliver long term value to our shareholders. We have a strong, more synergistic portfolio of industry leading businesses across a diverse landscape of industrial segments with attractive end markets. We will continue to improve our through cycle financial performance as we integrate ESG and realize synergies across the company.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

As always, I want to close by thanking our team members around the world. We will continue our exciting path forward, building and growing a new Terex. And with that, I would like to open it up for questions. Operator?

[Operator]

Thank Your first question comes from the line of Stephen Volkmann with Jefferies. Please go ahead.

[Stephen Volkmann, Managing Director at Jefferies]

Great. Good morning, everybody. Thank you for taking the question. It feels like ES margins, especially, are the gift that sort of keeps giving. So I wanted to delve into that a little bit.

[Stephen Volkmann, Managing Director at Jefferies]

You know, it seems like they've been coming in ahead of your expectations as well as ours. So so I'm curious, you know, what's driving that? I think you mentioned some mix in there as well. So is there much difference between utility and and refuse? And just kind of, a a little more color on on what's driving that.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Hey. Good morning, Steve. Yes. So we're very happy with the ES, q two OP performance, another strong quarter. It's driven by three factors and that 19%.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

First, we continue to see strong throughput in ESG driving the operational efficiencies and favorable factory adoption, similar to what we saw in Q1. Expect that to continue into second half of the year. Second, for the very first time, we see that there is better execution and utilities driving also operational efficiencies, which we are also expecting to see that in the second half of the year. Now the discrete item that happened in Q2 is related to the favorable customer and the product mix in utility, which we do not expect to recur in second half of the year.

[Stephen Volkmann, Managing Director at Jefferies]

Okay. Any color? I think you said maybe moderates in the second half, but kind of what does that mean in your mind?

[Jennifer Kong-Picarello, SVP & CFO at Terex]

So moderate, it means probably like a a percent lower, just the second half of the year.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yes. The favorable mix in Q2 is not expected to come back in Q3 and Q4.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Correct.

[Stephen Volkmann, Managing Director at Jefferies]

Understood. Thank you. I'll pass it on.

[Derek Everitt, VP, IR at Terex Corporation]

Thanks, Steve.

[Operator]

Your next question comes from the line of Mig Dobre with Baird. Please go ahead.

[Mircea Dobre, Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co]

Thank you for the question. Good morning. And I guess my where I would like to start is with your updated EBITDA guidance, maybe a little bit of color in terms of what drove the $20,000,000 adjustment. And I heard you talk about tariffs and mitigation maybe into the fourth quarter. Maybe you can help us understand exactly what your plans around mitigation would be.

[Mircea Dobre, Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co]

Presumably, that's not all pricing related. There there might be something else that, we should be aware of in there as well.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Hey, Meg. Good morning. I'll take the first question on the EBITDA, and I'll I'll hand it over to, Simon to talk a little bit about the tariff mitigation. Our 20,000,000 lower EBITDA is driven by, you know, a couple of puts and takes. The very first one, of course, with a stronger outlook in ES driving more margin, But it's largely offset by the unfavorable mix, that we see in Aerials in q two and also we expect for the rest of the year, and then coupled with the higher tariff.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yeah. And, when it comes to mitigation and tariffs, so ours our, story is we we are really dependent on, trade deals with basically four markets, The UK, the EU, China and Mexico. So two of those or three of those four are pretty much locked in, and we've all read the the headlines on China. So we'll we'll we'll see what comes out of that. But, we're we're getting more and more firm on on what our tariff, outlook is gonna be going forward.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And then in terms of mitigation, so, yeah, we're still in that $40.50 cent ball ballpark, if you will, in holding holding our outlook. But, yeah, we started the year, by by pulling in some supply, just pulling it forward because we we knew that, you know, there was risk of tariffs coming. And so we pulled material forward. We pulled some FTI forward. And then ever since, you know, we like like you would expect, we've been working very hard with our suppliers to absorb as much as much as they could and, obviously, looking at alternative supply solutions options, including reengineering or insourcing, making it ourselves, and other cost out actions.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And then obviously, we also have pricing our toolbox that is one of the tools that we're using, but the preferred option is to just work it out with our supply chain.

[Mircea Dobre, Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co]

Okay. Then my follow-up is on AWP. I guess I'm curious as to how you think about margins within the context of what you just said here for the second half of the year. It sounds to me that we should be thinking margins down relative to what you've been able to put up in Q2. And I'm also curious as to how comfortable are you with this implied top line guidance for the back half?

[Mircea Dobre, Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co]

Because if I do the math right, it seems to imply something like down mid single digits, and yet you know, backlog continues to erode us. At least in in theory, you should have quite a bit of pressure on production in the back half of the year. So, I know it's kind of a lot in this question, but appreciate it.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thanks for the question. I'll I'll take the backlog part, and then I'll let Jen start with the margin outlook.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Right. And, so on the margin outlook, look. The we clearly, for areas, is going through some challenging times. I do wanna reemphasize that despite all the, I would call it, the the very the channel adjustments that we made and now the Trump tariffs in q two is still a step up versus the Q1 of a 500 basis point of sequential margin improvement. For the rest of the year, what we're expecting is that the Q3 OP will be a mid single digit, a step down versus Q2, largely driven by the Trump tariff second, the lowest sequential volume in Q3 versus Q2 and then the third is the unfavorable customer mix that we see in Q2 to proceed for the rest of the year.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yes. And then on the backlog coverage, so we ended the second quarter with the low four months of backlog coverage in Aerials. We're now approaching August. So we have pretty good forward visibility of what the rest of the year looks like. We are firmly back to normal seasonality with higher book to bill in our traditional higher book to bill in Q4 and Q1 and fueled by higher sales in Q2 and Q3.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

The nationals, strong, obviously, as you know, mate, because of their exposure to large projects. Book to bill on independents did not quite come in as strong as we expected in Q2. Fleet still healthy, a healthy project pipeline. Main driver is replacement demand. We do see some recoveries happening in Europe, which gives us confidence.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And other pockets of like Africa, Middle East are strong. So with what we're currently seeing in the backlog, we feel pretty confident about that Aerial's outlook for the remainder of the year.

[Mircea Dobre, Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co]

All right. Thank you.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thanks, Nick.

[Operator]

Your next question comes from the line of David Drasso with Evercore Partners. Please go ahead.

[David Raso, Senior Managing Director - Equities at Evercore]

Yes. Hi. Thank you. The ES backlog coverage is big, and we appreciate that. But back to MP and Aerial, I just want to make sure now that we're sort of back into the normal coverage, I mean Aerial is a little higher than historical norms.

[David Raso, Senior Managing Director - Equities at Evercore]

But as you said, right, these conversations for '26, can you give us a sense of the customers, their sense of timing when they're willing to engage in conversations? I'm just curious, obviously, people have spoken about uncertainty ad nauseam for months now. But given some of the trade agreements, the passage of the legislation on bonus depreciation and thinking about next year broadly, can you give us a sense of those conversations right now? Is it a level of uncertainty? Or are they pushing the timing of engaging in orders back or maybe not?

[David Raso, Senior Managing Director - Equities at Evercore]

I'm just curious, the tone on '26, given we're back to normal coverage. That can include NP as well, Ariel.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

I would say larger customers stick to their cadence. And so we typically start those negotiations in this quarter in Q3 and will typically end in Q4, sometimes spills over in Q1. Normal cadence there, discussions. As I mentioned, fleet utilization quite where we would expect it to be. Smaller customers a little bit more hesitant and especially when you get into MP, which tends to be a book to bill business anyway, those are kind of just ongoing discussions, if you will.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And there's definitely still some caution. And so far, I've been talking about North America. In Europe, we do see the narrative changing and gets a little bit more upbeat. Started actually at BAMA earlier in the year, and we see more and more kind of momentum building. I wouldn't call it quite a V shaped type of recovery that we're anticipating, but definitely, we do see Europe slowly kind of coming around in both aerials and in MP.

[David Raso, Senior Managing Director - Equities at Evercore]

The conversations or anything about replacement demand levels versus this year? Any sense of timing or maybe pushing back even a little bit more on even with tariffs pushing back on price? Just some early vibe of how they're discussing it versus historical norms. And then Kim, real quick, the comment about EPS in the second half. Is it sort of $1.25 than $1.35 like the comment of fourth quarter a little higher?

[David Raso, Senior Managing Director - Equities at Evercore]

Is that roughly the right way to think about that comment, dollars 1.25 or $1.35 fourth?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yes. Thanks, Dave. I'll talk about replacement demand. So yes, normal discussions on replacement demand in aerials.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

In MP, we actually see some signs of fleets aging a little bit in certain subsegments within MP. And so what we are working on actually is trying to avoid we get back into that same pattern where all of a sudden everything starts, needs to be replaced and then we get into a supply issue again. So we're having those discussions right now to make sure that the fleet doesn't age too much on the MP side. And that's mostly that's especially in handling but also in aggregates. But in Aerial, it's very normal kind of replacement discussions going on.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

And David, good morning. So yes, for Q4, we're expecting that Q4 EPS to be slightly higher than Q3. I'll call it in that 1020% higher than q three just because of the timing of our mitigation actions, and our cost recovery actions as well.

[David Raso, Senior Managing Director - Equities at Evercore]

I appreciate it. Thank you.

[Derek Everitt, VP, IR at Terex Corporation]

Thanks, David.

[Operator]

Your next question comes from the line of Tammy Zakaria with JPMorgan. Please go ahead.

[Analyst]

Hey, this is Alex on for Tammy. Thanks for taking my questions. So, want to get some incremental updates on NP. I believe margins are expected to sequentially rise over the remaining balance of the year, you know, getting absorption under control. You've got some customer mix, positive business mix in crushing and screening.

[Analyst]

I just wanna confirm this is still on track, and any other incremental updates in NP and sort of what you're hearing on the ground in Europe or any green shoots would be great. Thanks.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yeah. So we definitely some gradual sequential improvement in MP, and it's expected to continue into the second half. Obviously, there is still caution in the pipeline, if you will, trying to gauge what tariffs is going to do to demand, what rates are going to do to demand. But definitely, what we are assuming is a continuous gradual sequential improvement. As I mentioned earlier, we do see healthy fleet utilization in NP across the board in both North America and The EU.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

So the fleet is working, and this is the kind of machinery that you can't sweat too long because it's being heavily used. We do see rental conversions extending. That's why I mentioned that fleet is aging a little bit beyond historical norms because there's still a little caution in converting. But, yeah, we are back to basically normal coverage. And with what we're seeing in terms of booking cadence is we're confident in that kind of sequential gradual improvement in our outlook. I'll let you want to weigh in on margins?

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Right. Good morning. So the margin is exactly what Simon mentioned skewed towards the q four due to the higher factory adoptions and also some favorable geographical mix.

[Analyst]

Understood. Thanks. I'll pass it on.

[Derek Everitt, VP, IR at Terex Corporation]

You're welcome. Thank you.

[Operator]

Your next question comes from the line of Kyle Mengus with Citigroup. Please go ahead.

[Kyle Menges, VP - Equity Research Analyst at Citi]

Thank you. I was hoping if you could elaborate just on changes to the assumed tariff impact. It looks like last quarter you had assumed $0.40 impact for the year, now assuming $0.50 So would be helpful maybe if you could unpack what you were assuming last quarter, what you're assuming now, or I guess tariff rates and mitigation efforts.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Perfect. Hey, good morning, Kyle. So if I could just walk from last outlook of the $0.40 to current outlook of the $0.50 it's largely driven by three factors. First, in our $0.50 we have included the EU reciprocal tariff increasing from 10% to 15%. And as what Simon mentioned earlier, that bill has been signed.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Second, it also includes secondary tariff impact higher than what we have originally expected in April. And third, it also includes the two thirty two steel tariffs doubling from 25% to 50%. When we add all of those three factors together, that offset the lower China reciprocal tariffs that we have assumed back in April.

[Kyle Menges, VP - Equity Research Analyst at Citi]

Great. That's helpful. And, it would be helpful to hear just that you expand on trends you're seeing in, really, North America material processing. Yeah. I guess what you're seeing aggregate and material handling.

[Kyle Menges, VP - Equity Research Analyst at Citi]

And, I mean, any early discussions with customers that have pointed to maybe more of a willingness for customers to come to the table to look at a new machine with bonus depreciation going back up to 100%?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yes. We see in North America still a little bit of caution, especially in smaller projects, but there's a lot of tailwind from the mega projects, and we expect that to continue for several years. We definitely expect that to continue to be a good guide for us. But then another thing that we see ramping up very clearly is transmission and distribution jobs, which is growing and we believe we're still at the beginning of the growth cycle there. So we see a lot of upside in utilities, which will obviously help our outlook for ES.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

But overall, it's a little bit of a, yeah, stronger manufacturing, construction, strong in data centers, strong in infrastructure. We see transmission and distribution, coming online, and we see a lot of upside there. And then obviously, a lot of strength in waste and recycling. Aggregates is still a little bit on the fence. We do see the fleet being used and replacements being pushed out.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And that's a little bit of a function of interest rates and just overall confidence and sentiment in the market. And then the last one I would call out is probably concrete. We see our concrete mix has continued to get good bookings. They get a lot of pull from infrastructure jobs and construction jobs. We had a high booking year in concrete mixes last year, and they're holding up that booking profile for this year.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

So that's kind of the mix as we see it in North America.

[Kyle Menges, VP - Equity Research Analyst at Citi]

Got it. And then I guess just any early indication that bonus depreciation is driving customers to come back to the table to order a new machine?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yes. I mean, the way we look at it is, obviously, it puts cash in the pockets of our customers, and that's always a good thing. And so for us, it's not a question of if it will eventually lead to incremental investments. It's more when. So we think that most companies are just trying to figure out what the cash benefits are going to be, what the tariff headwinds are going to be.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

But at some point, we assume that, that will lead to incremental investments. Key question is when I don't personally expect a lot of upside from it in the second half, but it could definitely be in play for 2026.

[Kyle Menges, VP - Equity Research Analyst at Citi]

Got it. Helpful. Thank you.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thank you.

[Operator]

Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

[Angel Castillo, Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley]

Hi. Thanks for taking my question and good morning. You mentioned on the independents that you expect them to remain cautious. So just kind of tying in with a lot of this discussion that we've been having, guess, how would you characterize the risk into the second half if OBB BA, I guess, doesn't necessarily kick in until maybe 2026 in terms of demand? What's kind of the risk here that things actually maybe worsen a little bit or that customers on the independent side just to kind of postpone purchases to more next year given we're kind of this far into the construction season already?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Well, we are back in our normal seasonality. So that's obviously one factor. The other one is yes, so we do see a continuation of strong demand coming from larger jobs, especially infrastructure, manufacturing, data centers. Data centers continues to be very strong, and we see upside in manufacturing construction as well. And then on top of that, as I mentioned earlier, we clearly see some early signs of transmission and distribution jobs starting to come online pretty soon.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

On the flip side is the smaller local private projects. And yes, we did see an uptick in inquiries and starts, and we'll have to see if that translates in spend. That's the big question. And it might be tied to what's going to happen with interest rates, but it's mostly a confidence factor. And we need to see if that confidence factor is going to kick in or not.

[Angel Castillo, Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley]

Understood. Thank you. And and two quick ones on MP, if if I could. Just on the one big beautiful bill of some of these changes, any, desire or kind of changes in incentives to actually move some of this production in MP perhaps to North America given some of the changes? And then given your comments around kind of the customers' ongoing cautiousness in terms of rent being conversion to buying, Just curious, I guess, is there anything is the choice to kind of continue to rent and not convert as quickly?

[Angel Castillo, Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley]

Is that simply just interest rate or macro kind of demand uncertainty near term? Or is this a bigger question of kind of customers' preference here of owning the equipment?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

No. I would say on your second question, it's mostly interest rate driven and overall sentiment. Just a little uncertainty on kind of what's going to happen in the second half, and that's causing a little bit of that delay in conversion. Definitely not a change in profile as we see it. And if you think about mobile crusher, our mobile crushing business, we the reason we like that business is because that's where the market is going.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

It's a much more flexible product. It's a product that you can have it travel with the job, and it just gives customers a lot of flexibility. And typically, they will want to own those assets instead of rent. So we don't see the profile changing per se. It's mostly just the confidence factor.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And then on your first point, yes, there's also a cash benefit for us, which we have included in our 300,000,000 to $350,000,000 outlook. We are constantly assessing our footprint. We have been making changes, but we want to see the current dynamics stabilize a little bit over the next six months before we get a little bit more firm on what we're going to do with footprint and where and when.

[Angel Castillo, Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley]

Very helpful. Thank you.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thank you.

[Operator]

Your next question comes from the line of Michael Fager with Bank of America. Please go ahead.

[Michael Feniger, MD - Equity Research at Bank of America Merrill Lynch]

Yes. Thanks, guys. Thanks for fitting me in. When we're talking about tariffs, you mentioned section two thirty two with steel. Is that impacting the cost profile in the second half?

[Michael Feniger, MD - Equity Research at Bank of America Merrill Lynch]

Or does that start to filter more into 2026? I'm just trying to understand because I think you guys do some hedging on the steel side for that. And just my my follow-up question just on the ESG side, you know, good performance. Just are you seeing any changes in the order ordering and purchasing, plans from your customers with maybe trying to get in front of tariffs or tariffs are impacting any of their kind of quarterly or yearly cadence in terms of how they're how they're kind of doing the pre buy? Thank you.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yeah. Thanks for the questions. I'll I'll ask, Jen to weigh in on on 02:32, and I'll take the bookings question.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Right. Hey, good morning, Michael. So I just want to mention on the still on your question on the we do not have material impact from a still inflation perspective because we do not import raw steel. And 70% of what we use is HRC, and approximately half of our second half of the year consumption is really hedged, like you said, is at very favorable rates. And our second half of year future price as it stands right now that we can see is only at most 1% to 2% inflation versus current rates, spot rates, so it's immaterial.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

And the import is still as part of our parts import is really part of our $0.50 guide.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yeah. And on the ES bookings, yeah, we see strong demand for both ESG and utility products on top of the eight months backlog coverage that we have. But bookings came in line with this time last year, especially when you take the shorter lead times into account. Historically, Q2 is the softer booking quarter for this segment. In a normal year, most negotiations will complete in Q4 and some in Q1.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

And so we were expecting and are expecting to for the backlog to continue to come down and return to more normal levels as lead times continue to improve. But overall demand profile, very strong for both ESG and utilities. With the current coverage and what our customers are saying, we have good line of sight to the 2025 and their first take on 2026. Customers are very deliberate on their cadence around fleet replacement, fleet management, but also fleet upgrades. And what we like is that we just continue to see ESG performing really, really well because of their competitive lead times, but also because their overall competitive value prop.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

The technology that they bring to this space is really making a difference. And what we like about this business is that that's where the market is moving as well. So we're moving towards where the puck is moving, and that really sets us up for the long term for a really nice run here. And then the last point I want to make within this segment, we also see utilities growing, taking share. The IOUs and public power companies are upgrading their fleet to maximize uptime, and we see significant upside coming from transmission and distribution jobs going forward. So overall, very bullish on that segment.

[Michael Feniger, MD - Equity Research at Bank of America Merrill Lynch]

Thank you.

[Operator]

Your next question comes from the line of Steven Berger with KeyBanc Capital Markets. Please go ahead.

[Steve Barger, MD - Equity Research at KeyBanc Capital Markets]

Hey, thanks. Good morning. I heard correctly, ESG margin will be about 100 basis points lower in the back half, which gets full year high 18% range. Understanding that mix can move around quarter to quarter, is that how we should think about normalized run rate for the time being? Or do you think that that picks up as we go into next year just from synergies and and operational efficiencies?

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Hey, Steve. Good morning. Yes. You're right. About second half of year about, I would call it, 1%, a 100 basis points lower than first half of the year.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

But we continue to expect that the operational efficiency, higher throughput with a fixed cost structure in both ESG and utilities that happened in q one favorable to us to continue for the rest of the year. And, of course, the customer mix and product mix sometimes, it it does change over, the last, second half of the year, but currently, that's not in our outlook. You talked a little bit about the synergies. Yes. So currently, just now, Simon talked about the we're running ahead in terms of our synergy, annualized more than 25, million That hasn't really dropped to entirely in this year, and that will be realized next year, and you would see that in the OP.

[Steve Barger, MD - Equity Research at KeyBanc Capital Markets]

Got it. Okay. And then, Simon, just a quick one. You talked about Third Eye and digital revenue streams. I think you said there's other digital revenue streams you envision in the future. Can you talk a little bit more about that?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Yeah. As I as I mentioned in our opening remarks, so we are now bolting third eye technology onto our concrete mixers and our utility trucks. And there's a lot more coming. But whatever helps operator safety, whatever helps vehicle productivity, vehicle efficiency, health monitoring, there's just a lot of use cases that we're exploring with Third Eye, and it's a real gem in the portfolio. And it really does what it really does intrinsic adds intrinsic value to our customers.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

So we're very, very pleased with the momentum that we have in Third Eye, and we see more use cases coming.

[Steve Barger, MD - Equity Research at KeyBanc Capital Markets]

So, yeah, you said there's a lot more coming. Is that does that mean you're expanding the Third Eye product specifically, or there's a lot more digital revenue streams outside of Third Eye that you think are on the drawing board?

[Simon A. Meester, President, CEO & Director at Terex Corporation]

I I would say both. So we see we see our Third Eye offering expanding, and we see the use cases expanding for Third Eye.

[Steve Barger, MD - Equity Research at KeyBanc Capital Markets]

Got it. Okay. Thanks.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thank you.

[Operator]

The next question comes from the line of Tim Tain with Raymond James. Please go ahead.

[Tim Thein, Managing Director & Research Analyst at Raymond James Financial]

Thank you. Good morning. I just had a question, if I heard correctly, what the higher expected EPS in the fourth quarter to the third, I believe, Jen, you cited MP margins. I'm just curious if you could maybe if I heard that correct, maybe expand on that. Is that product mix you have in the backlog that you see shipping?

[Tim Thein, Managing Director & Research Analyst at Raymond James Financial]

Is it well, anyways, I think it's somewhat counter to seasonal trends and the fact that that's called out as a driver. Just wanted to clarify that in terms of what's supporting that.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Hey, Tim. Good morning. So yes, our Q4 EPS is going to be higher than our Q3, I will call it, you know, 10% to 20% higher. And that's driven by three things. First is, like I mentioned earlier, the tariff mitigation actions is gonna flow through more in q four versus than q three.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Second is the timing of our tariff cost impact is largely in q three and less in q four. And then finally, I did yes. I did mention about the MP, the sequential improvement in the margin profile driven by better factory absorption and also favorable geography mix.

[Tim Thein, Managing Director & Research Analyst at Raymond James Financial]

Got it. Okay. And then, just a small one, but the the reduction in the tax rate from 20 to 17 and a half, I, I I don't know. As we think about it, if the it with with ES being a US accounting ES driving more US profitability, is that a run rate to think about for '26 or or not? Just curious.

[Derek Everitt, VP, IR at Terex Corporation]

Yeah. Sorry. Go ahead.

[Jennifer Kong-Picarello, SVP & CFO at Terex]

Yeah. So, of course, we're not guiding '26 at this point in time, but our 17.5% of full year revised outlook here, are driven by discrete items. And if looking forward, you know, we expect our ETR to normalize, of course, in that ballpark of 19% range as we fully utilize our global tax attributes. I think while, you know, ES margin is coming higher, we also are doing very active tax planning. So

[Tim Thein, Managing Director & Research Analyst at Raymond James Financial]

Understood. Alright. Thanks a lot.

[Derek Everitt, VP, IR at Terex Corporation]

You're welcome. Thank you.

[Operator]

There are no further questions. I would now like to turn the call back over to Simon Mister for closing remarks.

[Simon A. Meester, President, CEO & Director at Terex Corporation]

Thank you, operator. So if you have any additional questions, please follow-up with either Jen or Derek. And with that, thank you for your interest in Terex. Operator, please disconnect the call.

[Operator]

Ladies and gentlemen, that concludes today's conference. You may now disconnect your lines.

Participants

Executives

• Derek Everitt, VP, IR
• Simon A. Meester, President, CEO & Director
• Jennifer Kong-Picarello, SVP & CFO

Analysts

• Stephen Volkmann, Managing Director at Jefferies
• Mircea Dobre, Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co
• David Raso, Senior Managing Director - Equities at Evercore
• Analyst
• Kyle Menges, VP - Equity Research Analyst at Citi
• Angel Castillo, Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley
• Michael Feniger, MD - Equity Research at Bank of America Merrill Lynch
• Steve Barger, MD - Equity Research at KeyBanc Capital Markets
• Tim Thein, Managing Director & Research Analyst at Raymond James Financial