Terex Corp.’s (TEX) fourth-quarter 2012
adjusted earnings of 19 cents per share declined 24% from 25 cents
earned in the year-ago quarter. The company’s earnings fell well
short of the Zacks Consensus Estimate of 39 cents. Including
special items, Terex reported loss per share of 28 cents in the
quarter compared with earnings of 4 cents in the year-ago
quarter.
Total revenue declined 13% year over year to $1.695 billion,
missing the Zacks Consensus Estimate of $1.825 billion.
Costs and Margins
Cost of goods sold declined 16% to $1.39 billion versus $1.65
billion in the year-earlier quarter. Gross profit increased 2% to
$307.6 million. Gross margin expanded 260 basis points to 18.1% in
the quarter.
Selling, general and administrative expenses rose 3% to $279.7
million in the quarter. The company reported an operating income of
$27.9 million, a 10% decline from $31.1 million in the year-ago
quarter.
Segment Performance
Total revenue at Aerial Work Platforms increased 5% year over
year to $459.4 million. The improvement was mainly driven by
increased fleet replenishment in North America, stronger price
realization and increased service penetration in the aerials and
utilities businesses.
However, these benefits were partially offset by lower sales
of telehandlers as a result of a planned production shutdown.
Operating income saw a 63% increase to $42.6 million from $26.2
million in the prior-year quarter, driven by price realization,
customer mix, which helped offset increased inventory
charges.
Total revenue at the Construction segment declined 35% to
$266.4 million. Results deteriorated due to soft demand in the end
markets, especially in Western Europe. Demand for material handlers
remained weak on the back of low steel scrap prices and decreased
utilization on existing equipment.
The segment reported an operating loss of $44.9 million versus
a loss of $2.8 million in the year-earlier quarter, driven by
reduced sales volumes, partially offset by improved price
realization and cost savings initiatives taken in 2011 and
2012,
Cranes segment’s total revenue dropped 9% to $394.9 million.
Weak demand in Western Europe offset strong demand in North
America, Australia and the Middle East. Sales in the Middle East
were strong, particularly in Turkey and Saudi Arabia. Operating
income went up to $45.7 million from $14 million in the
year-earlier quarter, driven by price realization and cost cutting
efforts and increase in aftermarket sales.
Total revenue at Material Handling & Port Solutions
declined 15% to $439.6 million due to reduced sales of port
equipment and lower volumes of standard material handling cranes
and light crane systems.
The segment reported an operating loss of $21.9 million
compared to a loss of $19.8 million in the year-ago quarter;
affected by lower volumes, an unfavorable product mix and higher
material costs.
Total revenue at the Material Processing segment were $152.1
million, down 11% year over year due to weak Western European
markets for screening products. This was partially offset by strong
demand in North America and Australia.
The segment reported an operating profit of $16.2 million, up
18% from $13.7 million in the prior-year quarter. Operating profit
improved as a result of favorable manufacturing expense driven by
supply chain savings as well as lower production and warranty
costs.
Fiscal 2012 Performance
Terex reported adjusted earnings per share of $1.83 in 2012,
increasing four fold from 46 cents in 2011. Adjusted earnings were
below management guidance in the range of $1.95-$2.05 per share as
well as the Zacks Consensus Estimate of $2.02. Including special
items, reported earnings were 91 cents per share compared with 35
cents in 2011.
Total revenue improved 13% year over year to $7.348 billion,
missing the Zacks Consensus Estimate of $7.493 billion as well as
management guidance of $7.5 billion.
Financial Position
As of Dec 31, 2012, cash and cash equivalents amounted to $678
million versus $774 million as of Dec 31, 2011. Cash from operating
activities was $292 million in 2012 compared with $22.7 million in
2011. Debt to capitalization ratio was 51% as of Dec 31, 2012
compared with 55% as of Dec 31, 2011.
Outlook for 2013
Terex expects earnings per share in 2013 to lie between $2.40
and $2.70 and net sales between $7.9 billion and $8.3 billion. The
company expects to generate more than $500 million in free cash
flow during the year and remains committed to reducing its
debt.
Our View
Terex aims at improving margins and its earnings and
generating cash flow to help reduce the debt level. Entering 2013,
the Aerial Work Platforms (AWP) segment continues to benefit from
North American rental channel demand. Crane segment’s performance
is also expected to remain strong in North America and in certain
developing market regions.
In the Construction segment, Terex is planning to divest
majority of its roadbuilding product lines and exit a number of
compact construction component manufacturing businesses in Germany.
These businesses have not been performing as per expectations and
these help improve overall operating results. Terex retains a
short-term Zacks Rank #2 (Buy).
Peer Performance
One of the major companies in the machinery – construction and
mining industry, Caterpillar Inc. (CAT) reported
fourth quarter adjusted EPS of $1.91, down 18% from $2.32 in the
prior-year quarter, but ahead of the Zacks Consensus Estimate of
$1.70.
Joy Global Inc. (JOY) reported adjusted
earnings of $1.99 per share in the fourth quarter of fiscal 2012,
compared with $1.83 per share in the fourth quarter of fiscal 2011
and ahead of the Zacks Consensus Estimate of $1.90.
Manitowoc Company, Inc. (MTW) reported
fourth-quarter 2012 adjusted earnings from continuing operations of
27 cents per share, beating the Zacks Consensus Estimate of 24
cents and exceeding the prior-year quarter’s earnings of 14 cents
per share.
CATERPILLAR INC (CAT): Free Stock Analysis Report
JOY GLOBAL INC (JOY): Get Free Report
MANITOWOC INC (MTW): Free Stock Analysis Report
TEREX CORP (TEX): Free Stock Analysis Report
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