Terex Corp Q4 2024 Earnings Call Transcript

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

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Congratulations on strong ESG performance out of the gate, what really stood out was the margin performance in the quarter and the year-over-year growth. Can you just talk about the sustainability of the margin performance we saw in the quarter, whether there's any payroll mix or any other pieces because that was -- look to be up significantly year-over-year as we come out the outlook heading into next year. And the other dynamic is Hao has picked up significant share over the past post-COVID cycle. It looks like based on the bookings, it looks like that momentum is continuing, but wondering if you could just double-click on that for us, if you don't mind?

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Super. And can I share let me just give you an opportunity to comment on the company's ability to move around the sourcing given every two days, we're looking at a different potential tariff picture. I think initially, when you were contemplating changes in the footprint you were targeting significantly more than 25% cost savings to make the investment move. So I'm wondering if you could just flesh that out for us, it's been a key topic over the past couple of weeks.

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Yes, I apologize. Yes, the tariff picture in North America, given potential for tariffs to be implemented on Mexico and Canada. I just wanted to give you a platform to expand on what the company can do.

Question: Steven Fisher - UBS Securities LLC - Analyst : Best wishes, Julie. Congratulations Jen. I just want to start off by asking about the AWP order trends, how they came in relative to your expectations for the quarter? And kind of what you see your customers doing with their fleets this year? Is this sort of just a replacement year? Is it a bit of a shrinking? How do you kind of frame that? I know you said you've secured some additional commitments in January. So like how important is the first quarter relative to sort of the seasonal picture of bookings? Was there something of more clarity that the industry got in January that enable those commitments? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, TEX.N - Q4 2024 Terex Corp Earnings Call

Question: Steven Fisher - UBS Securities LLC - Analyst : Okay. That's very helpful. And then, I guess, on Europe, can you just give us a sense of kind of momentum there? Is it -- is it still getting weaker? Is it stabilizing? And any sense of what it will take to get that going a little bit more positively?

Question: Steven Fisher - UBS Securities LLC - Analyst : In general, across the business.

Question: Tami Zakaria - JPMorgan Securities LLC - Analyst : My first question is on the ESG outlook, up mid-single-digit percent you're expecting this year, which seems a bit lower than the high single-digit CAGR that business has seen historically. So what's driving that outlook? Is it including the legacy tax utilities business or just the ESG portion. Any color there would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, TEX.N - Q4 2024 Terex Corp Earnings Call

Question: Tami Zakaria - JPMorgan Securities LLC - Analyst : Got it. That's very helpful. And then the other question is, I think I heard you say the first quarter EPS would be about 10% of the full guide. So could you just give us some pointers on how to model the first quarter in terms of the segments, especially AWP, I'm just trying to understand how to get to that 10% EPS for the three segments?

Question: Steve Volkmann - Jefferies LLC - Analyst : All right. Just to follow on Tammi's question there. Julie, your comments about lower you talking about lower year-over-year in the 1Q? Or is it actually sequentially lower than the fourth?

Question: Steve Volkmann - Jefferies LLC - Analyst : Okay. Great. And then maybe, Simon, a couple of kind of real bigger picture questions. I'm curious if you have any comments to what you think is happening with the AWP cycle? Are we in sort of a lull here and it starts to regrow going forward? Or do we have sort of a more protracted downturn, just any kind of views from your seat would be great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, TEX.N - Q4 2024 Terex Corp Earnings Call

Question: Jamie Cook - Truist Securities, Inc. - Analyst : I guess just two follow-up questions. One, just on ESG. Just trying to understand how you're thinking about the accretion of ESG in 2025 relative to when you announced the deal. And you talked about double-digit accretion. It doesn't sound like anything's changed given the performance in the quarter and what you've seen in bookings, but I just want to clarify that because it's hard to back into it the way you guided and then I guess just my second question on the Aerials business understanding. You had strong orders, I think you said in January, and we expect normal seasonality and Simon, just trying to understand to what degree. How you're thinking about pricing and giving yourself flexibility, I guess, if we do get into a situation where tariffs become an issue. I mean, I think tariffs under Trump's last administration managed very well in terms of like price cost and managing that, but just wondering how you're thinking about managing the business and getting these orders with tariffs potentially on the come.

Question: Jamie Cook - Truist Securities, Inc. - Analyst : And before you cut me off, Julie, I just wanted to say thank you for all your help, and congrats on a great performance and congrats to whatever is ahead. Thank you.

Question: David Raso - Evercore ISI - Analyst : Congratulations, Julie. I don't want to make this a math question, but given the moving parts, the lack of the restate, I apologize in advance for the math here. Can you -- I don't understand the decremental margin commentary on the segments, the down within our 25% target. To help me get a better sense how that's possible, what is the operating margin you're assuming ESG Dover has, the stand-alone business, don't blend it with the utility. So the business that just reported 21.9% for the quarter, I know it was a stub quarter, what are you thinking that business stand-alone EBIT margin would be for '25?

Question: David Raso - Evercore ISI - Analyst : With that stub number?

Question: David Raso - Evercore ISI - Analyst : Okay. So again, I apologize in advance, but we have a lot of moving numbers here. We don't have normal detail. If you strip out ESG Dover, you have 2024 revenues, $4.9 billion and take out the $50 million of EBIT, right? So the EBIT is 532, 10.9% margin. I want to look at legacy-legacy. Then we have a guide of $5.4 billion, but roughly $900 million is ESG Dover. So legacy-legacy, it's $4.9 billion of revs going to $4.5 billion. If I look at the EBIT implied for 25 all in, right, 12% margins on the 5.4, take out the $75 million of corporate expense. So we're at $573 million of EBIT all in. But if you pull out the $900 million of revenue from Dover and pull it out at a 21.9% margin it's implying the legacy company had decrementals of 39. So how does AP and MP, say, we're 25% decremental margins? So again, I apologize for all that math. But again, the decrementals legacy appear to be closer to 40% than the 25% you're implying. And again, I apologize, but that is the math. So I'm just trying to understand. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, TEX.N - Q4 2024 Terex Corp Earnings Call

Question: David Raso - Evercore ISI - Analyst : Okay. So AWP decrementals for the full year, and again, I know it's just a bad start, but for the full year, they're down whatever, 50% decrementals for the year. It's just saying, hey, all that pain is in the first quarter, and then we kind of get within our normal trajectory of decrementals after that. That's the key wrinkle there.

Question: David Raso - Evercore ISI - Analyst : Okay. Really appreciate. And lastly, on the orders for '25 on AWP any sense of price or even price cost? Just trying to get a sense of the comfort of improving those margins after the first quarter. just a better sense of why the decrementals would be so much better the rest of the year.

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : Julie, all the best to you going forward. I want to ask an MP question here. When I was looking at your outlook, one of the things that stood out to me is that you expect MP to decline less than AWP, but arguably speaking, to orders and backlog pressure is maybe even greater here in MP. So I guess what I'm wondering is, why is that the case? How do you think about demand, just outright customer demand as the year progresses? It seems like you might have some improvement baked in here? And then on Q1, how should we think about this segment relative to what you were -- you put up in Q4 from a margin standpoint?

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : Okay. That's very helpful. My follow-up goes back to the discussion around tariffs. And I guess the way I kind of interpreted your comments was that you would be looking at potentially changing your manufacturing footprint as a result. If that's the case, I do wonder what that does structurally for your margins because as I understood it, your investment in Mexico was really kind of the fundamental for improved margins in AWP longer term. Is that no longer the case?

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : But what about the margin issue here?

Question: Kyle Menges - Citigroup Inc. - Analyst : Congrats, Julie. I just wanted to dive deeper into the ESG margin comments. So if I heard you guys correctly, it sounded like ESG margins guiding to kind of flat year-over-year. So I'm just confused, I guess, like why it wouldn't be a bit better if you're assuming growth for ESG and then some synergies as well. I guess what synergies are embedded in the guidance? And has the magnitude or timing of synergy capture changed at all since you announced the deal?

Question: Kyle Menges - Citigroup Inc. - Analyst : Okay. And then just a quick math follow-up question, apologies in advance, but just looking at the guidance. So if I take the I guess, the midpoint of revenue and op margin guidance, I'm getting to, I think, adjusted operating margin around [$575 million] and then adding back the D&A, I'm getting to EBITDA around [$735 million] versus the EBITDA guide of $660 million. So is that $660 million number for EBITDA and unadjusted number? Or is that kind of the delta that I'm missing?

Question: Tim Thein - Raymond James Financial, Inc. - Analyst : Great. Maybe just -- we'll wrap it up in two combined questions on the ES business that was just acquired. So the high-end business. The first is just from a customer mix standpoint, and I forget if this came up when you announced the deal on the call. But post COVID, it seems that bulk of the deliveries in terms of -- on the refuse side have been tendered more into the big four major players. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, TEX.N - Q4 2024 Terex Corp Earnings Call And I'm just wondering as chassis availability improves, is there more of a broadening out in terms of -- from a customer mix perspective, does that benefit the company in terms of potentially shifting more to local refuse operators in terms of who's getting those deliveries. So maybe that's question one on the customer mix. And then on the technology, it seems, at least from what we've heard from the operators that this third eye technology is really well regarded and respected I'm wondering if there's opportunities for Terex to potentially leverage that across other parts of the organization. I don't know if that's feasible, but just curious if that's something that you've explored since taking over the business.

Question: Tim Thein - Raymond James Financial, Inc. - Analyst : Best wishes to you as well, Julie