Terex Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jerry Revich - Goldman Sachs - Analyst : I was really impressed by the ES margin improvement in the quarter. I'm wondering if you could just expand on the comments you made, Jennifer, on the margin outlook. In coming quarters, it looks like you were right at about 17% margins for most of last year. If that's the cadence for this year, it looks like operating profit for the business would be up over 30%. So I just want to make sure I understand the moving pieces within that and the drivers of the really strong margin performance in the first quarter.

Question: Jerry Revich - Goldman Sachs - Analyst : Well done. And then just to shift gears, Simon, appreciate the comments you made about maintaining price cost neutrality. Can you just talk about how you're handling orders that you folks are booking today? Is there a surcharge mechanism in place? And I saw the guidance comments spoke about assumption around where tariffs move going forward. Can you just expand on those assumptions and if tariffs are worse? How is what's priced in backlog going to play out to maintain price cost neutrality?

Question: Jamie Cook - Truist Securities - Analyst : Hi, good morning, and congratulations on a nice start to the year. Just want to understand, I guess, Jennifer, the puts and takes of the guidance. Obviously, we beat the first quarter. But I think you said you're going to have a $0.40 headwind related to tariffs. So if you can just walk us through? And I guess maybe ES is a little better, but just the puts and takes of how we're maintaining the guide given the different dynamics there? And then I guess my second question what we know about tariffs today and where you're manufacturing your products because it's not looks like a lot of your products are manufactured in the US, which is just wondering if there's a there's a market share or competitive advantage for tariffs in certain product lines or segments? And if so, could you just highlight where that could be? Just wondering if there's a market share or outperformance story here?

Question: Jamie Cook - Truist Securities - Analyst : Yeah, sorry. The second question, just based on what's going on with tariffs and you're saying you manufacture 75% of your products in America or made in America. I'm just wondering if there are certain product lines where you have a competitive advantage because of your manufacturing footprint? And if so, where that would be so that you could potentially gain market share?

Question: David Raso - Evercore ISI - Analyst : Hi, thank you. Two questions. One on the Aerial margin progression 1Q to 2Q and then the full year thoughts around material processing. For Aerials, can you give us some help on how you're viewing your revenue growth sequentially? I'm just trying to get a sense of what the sequential incremental margin is implied to go from the 3% operating margin in the first quarter to 10%?

Question: David Raso - Evercore ISI - Analyst : Thank you. I wanted to ask an MP question. I'm sorry. I wanted to follow up on the 1Q to 2Q margin comment for Aerials. When you say the normal ramp, obviously, utilities pulled out, right? So I can go back and restate obviously, some of the years. But are we saying about a 20% to 25% sequential on revenue roughly. When you say normal, how do you define normal in the new Aerial segment with utility just so I am clear?

Question: David Raso - Evercore ISI - Analyst : Okay. And the idea of maybe some landed product. I'm trying to get a sense of the tariff impact on 2Q. Is it fairly light on Aerials, particularly given I know the manufacturing base is really helpful but the idea you sort of to get ahead of the curve a bit on steel and a variety of things. I'm just trying to get a sense of the things that can make that easier. And as you said, under absorption is reduced. You have some volume sequential. And then on price cost, it seems like, if I remember correctly, you got a bit ahead on some of the cost issues, too. Just to gain more comfort because obviously that's a big driver of the sequential EPS 1Q to 2Q.

Question: David Raso - Evercore ISI - Analyst : I appreciate it. you have enough costs landed for 2Q, you get some volume ramp, the tariff issue is what more of a back half story for Aerials, but maybe that gives you a little bit of time to try to push price where you can and mitigate in other ways. Okay, I got it. I really appreciate it.

Question: Mig Dobre - Baird - Analyst : Thank you. I appreciate all the good color on what's baked into this $0.40. But one thing that I guess I did not hear you talk about is any tariff on the U.K. Now I don't know if I have my extra here, but that reciprocal tariffs at 10%. I guess it's there. And I'm wondering how that impacts MP and what's baked in at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, TEX.N - Q1 2025 Terex Corp Earnings Call

Question: Mig Dobre - Baird - Analyst : So just to be clear, are you raising the price on MP this is basically the offset? Or is this impact just not factored into the $0.40 at this time?

Question: Mig Dobre - Baird - Analyst : Very well. And then my last question is on ES. Really good margin performance here. I guess going back to the way this business, I recall performing under previous ownership some years back, the margin profile here is quite a bit better than what used to be here historically. Now that you're the owner of this asset and you're kind of looking into what has happened from a cost perspective and a margin perspective, how sustainable do you think current margins are beyond maybe 2025? Is there something unique in the price cost dynamic or anything else that investors need to be aware of as they think maybe two to three years out?

Question: Tami Zakaria - JPMorgan - Analyst : Hey, good morning. Thank you so much, and very good results. So I wanted to follow up on that $0.40 comment. Is that assuming China tariffs stay at the 145% or what rate is assumed for China to get to that $0.40? Because I think in the presentation, you mentioned you expect some easing of tariffs. So I just wanted to clarify.

Question: Tami Zakaria - JPMorgan - Analyst : Understood. That's very helpful. And then my second question is on MP or broadly for Europe, I think there was a stimulus plan package that was past for Germany. How big is Germany for you? And any thoughts on which end markets could benefit from a package like that? And how that relates to your portfolio, especially that might benefit in the coming quarters or even years?

Question: Tami Zakaria - JPMorgan - Analyst : Okay great thank you.

Question: Tim Thein - Raymond James - Analyst : Great, thank you. Good morning. Great. I'll just pack 2 questions together. The first is on the ES performance in the quarter, I'm curious if there were any purchase price adjustments that were included in the quarter? And then the second question just is on operating costs and separate from the tariff discussion. Just curious how you are, I believe, hedged from a steel perspective, for the year. Obviously, that's just in North America. But maybe just a discussion regarding general operating costs, just in light of some of the fluctuations in commodity markets, how you're thinking about the balance of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, TEX.N - Q1 2025 Terex Corp Earnings Call

Question: Tim Thein - Raymond James - Analyst : Yes, we have about $10 million of purchase price adjustments in ES, just a typical based on the acquisition accounting. And so with regard to your second question on the steel, we do not have any material impact from steel inflation because, first of all, we do not import any more steel and then about 70% of what we use as HRC. And we also have 50% of that hedge at a very favorable rate. So the imported steel in pre-fiber (inaudible) parts are already part of our $0.40 and the others are not material.

Question: Kyle Menges - Citigroup - Analyst : It sounds like you guys are now expecting the ESG synergies to come in a little bit more than that $25 million target. So would just love to hear what's giving you confidence in that and just where so far synergies are looking to be a little bit better than expected?

Question: Kyle Menges - Citigroup - Analyst : And then just a second question on the Monterrey facility. Just how are you thinking about production shifts from the US to Monterrey, assuming that you've kind of paused that for now? And then just how are you thinking about looking at alternative sources into that Monterrey facility just in the supply chain. And sorry if I misheard, but I thought you guys had said that only 20% of the products from the Monterrey facility or USMCA compliant? Sorry, if I misheard that, but just if you could comment on that as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, TEX.N - Q1 2025 Terex Corp Earnings Call

Question: Kyle Menges - Citigroup - Analyst : Makes sense. Thank you. You.

Question: Angel Castillo - Morgan Stanley - Analyst : Morning and thanks for taking my question. I was hoping you could put a little bit of finer point on the ES segment and just the margin moderation that you expect in 2Q. And as we think about the progression of maybe tariffs as we get maybe towards the back half of the year, if you could just fold that in, along with maybe greater success on the synergies as well as maybe sizing the one-offs that you mentioned would be helpful?

Question: Angel Castillo - Morgan Stanley - Analyst : Got it. That's helpful. And then maybe just on I wanted to go back to MP. I think this was the first quarter where you saw backlog growth since maybe kind of 2022. And I know that, that's been normalizing. But just curious if there's anything specific maybe even related to what you were talking about with Germany or more broadly, any step change in that business that gives you maybe confidence that we fund about them and maybe you can even grow from here? Or just how should we read that improvement in the backlog and what you're hearing from customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, TEX.N - Q1 2025 Terex Corp Earnings Call

Question: Angel Castillo - Morgan Stanley - Analyst : So just to be clear, that assumption is embedded in the 2025 cadence?

Question: Angel Castillo - Morgan Stanley - Analyst : Got it. Okay, thank you.