Terex Corporation (TEX) Earnings

Management highlights

- **Consolidated Performance & Macro Demand Backdrop** - Q2 2026 consolidated revenue was $2.24 billion, up 8.5% year-over-year pro forma, with growth across all segments. Adjusted EBITDA was $269 million, up 10.7% year-over-year pro forma, while bookings increased 25% year-over-year pro forma, and total backlog reached $6.9 billion. - Macro demand is positive and improving across most verticals: U.S. non-residential construction starts are up 18% year-to-date to $368 billion, driven by data centers, energy investments, and civil infrastructure projects. Higher product utilization, increased customer capex, and positive dealer sentiment confirm broad demand growth. - Recent U.S. federal infrastructure policy and healthy municipal budgets support recurring replacement demand for emergency and municipal specialty vehicles. Long-term demand drivers include grid modernization, renewable energy investment, and ESG mandates for environmental solutions. - **Integration & Strategic Execution Progress** - Both the ESG acquisition and REV merger are performing above their original business case targets. REV integration is progressing as planned, with synergy realization on track, and the specialty vehicle segment delivered record Q2 earnings. - Capacity expansion projects are near completion: the Ocala, Florida ladder truck plant expansion and Brandon, South Dakota S180 semi-custom pumper plant expansion are on track for first deliveries in Q4 2026, focused on increasing throughput and reducing lead times. - A strategic review of the Aerials segment is ongoing, with interest from multiple parties, and management is working toward an outcome that maximizes shareholder value, with no additional details to share at this time. - **Segment-specific Operational Updates** - Environmental Solutions: Refuse collection vehicle (RCV) bookings grew year-over-year in Q2 2026, the first annual increase since Q1 2025, indicating building momentum for 2027. Terex Utilities is ramping shipments and capacity to meet accelerating grid modernization demand, and launched the new industry-first TRX product line that eliminates the need for a commercial driver license. - Materials Processing: The U.S. mobile crushing and screening market is growing, with increased fleet utilization and rent-to-purchase conversions, and demand is broadening to include material handling and concrete mixers. - Aerials: The segment continues to navigate tariff headwinds and execute mitigation efforts, with price-cost position improving in Q2, and management expects full year price-cost neutrality based on current backlog visibility and ongoing cost reduction actions.

Guidance

- Terex raised its full year 2026 guidance following strong first half performance, higher than expected Aerials volume, and improved Materials Processing performance. New guidance ranges are: total sales of $7.9 to $8.2 billion, adjusted EBITDA of $960 million to $1 billion, and adjusted EPS of $4.70 to $5.10. - Full year free cash flow is expected to be $300 to $350 million, effective tax rate is expected to be 21%, interest expense is projected to be ~$185 million, and 22% incremental adjusted EBITDA margin conversion is expected at the midpoint pro forma, despite ongoing tariff pressures. - Segment-specific guidance updates: Environmental Solutions full year revenue is now expected to grow low single digits (down from prior expectations of pre-buy driven mid-single digit growth), Materials Processing full year sales are expected to grow low double digits, Specialty Vehicles full year revenue is expected to grow high single digits, and Aerials full year sales are now expected to grow low double digits (up from prior flat expectations). - EPS cadence expectations: Q3 2026 EPS will be similar to Q2 2026 levels, followed by a typical seasonal step down in Q4 2026.

Segment performance

1. **Environmental Solutions**: Quarterly revenue was $456 million, an increase of $26 million (5.9%) year-over-year. Revenue contribution is ~20.4% of consolidated quarterly revenue. Adjusted EBITDA margin was 17.5%, a 250 basis point decrease year-over-year, driven by unfavorable product mix, production inefficiencies, and lower volumes in the refuse collection vehicle (ESG) sub-segment, partially offset by strong demand and shipments in Terex Utilities. Quarterly bookings were $417 million, up 18% year-over-year. 2. **Materials Processing**: Quarterly revenue was $464 million, an increase of $47 million (11.1%) year-over-year. Revenue contribution is ~20.7% of consolidated quarterly revenue. Adjusted EBITDA margin expanded 440 basis points to 18.8% year-over-year, with 180 basis points from one-time benefits, driven by favorable product mix and price-cost discipline. Quarterly bookings were $469 million, up 18% year-over-year pro forma, ending the quarter with a backlog of $599 million (up 63% year-over-year). 3. **Specialty Vehicles**: Quarterly revenue was $650 million, an increase of $38 million (6.2%) year-over-year. Revenue contribution is ~29% of consolidated quarterly revenue. Adjusted EBITDA margin improved 210 basis points to 14.5% year-over-year, driven by favorable mix, operational efficiencies, and price realizations, partially offset by cost inflation. Quarterly bookings were $588 million, up 9% year-over-year, led by the large City of Chicago order for 80 fire trucks and 40 ambulances. 4. **Aerials**: Quarterly revenue was $673 million, an increase of 10.9% year-over-year. Revenue contribution is ~30% of consolidated quarterly revenue. Adjusted EBITDA margin was 5.7%, down 340 basis points year-over-year due to higher tariffs compared to the prior year, but improved 560 basis points sequentially from Q1, driven by improving price-cost dynamics and higher production volume. Quarterly bookings were $530 million, up 71% year-over-year, ending the quarter with a backlog of $914 million (up 28% year-over-year).

Risks & headwinds

- Geopolitical and macroeconomic uncertainty exists, with European markets noted as more vulnerable to potential stagflation than the resilient U.S. market, which could pressure international demand for Materials Processing and other segments. - Sustained higher tariffs on Aerials imports create ongoing margin pressure, though management has implemented mitigation actions to offset this impact for full year 2026. - Lead times for specialty fire trucks remain elevated above sustainable levels, and it will take approximately two years of targeted capacity expansion and throughput improvement to reduce lead times to the target of ~1 year, which could impact customer satisfaction in the near term. - Actual results could differ materially from forward-looking guidance due to unanticipated changes in macro conditions, regulatory implementation timelines, and supply chain dynamics.

Analyst Q&A

• Q: What is driving the low single-digit revenue growth outlook for Environmental Solutions, and how will segment margins trend in the second half? /

  A: Strong 18% year-over-year bookings growth is driven by accelerating demand at Terex Utilities, which is offsetting temporary softness in RCV. The pre-buy of RCV ahead of 2027 EPA regulations originally expected for H2 2026 will spill over to 2027 due to delayed implementation, so the outlook was revised lower. Margins are expected to step up from Q3 to Q4, driven by favorable product mix and the resolution of near-term production inefficiencies at Utilities.

• Q: How is the REV integration progressing beyond stated near-term synergies, and what long-term efficiency opportunities are emerging? /

  A: The integration is going well after five months, and the segment delivered record Q2 earnings with the same pre-merger operational leadership team maintaining strong improvement momentum. The manufacturing excellence from ESG (acquired for environmental solutions) is already helping improve margins at Terex Utilities, and that same expertise is expected to drive long-term efficiency gains for specialty vehicles, primarily by reducing labor hours per unit. The $28 million full year synergy target is on track, with 20% realized in Q2 and the remaining 80% expected to be realized in H2.

• Q: Why did specialty vehicle backlog decline, and what is the current outlook for fire truck demand? /

  A: The backlog decline is intentional: management is focused on ramping throughput to reduce long customer lead times, so it expects booked-bill ratios to stay below 100% as lead times fall to a sustainable ~1 year over the next two years. Bookings growth remains strong, highlighted by the large City of Chicago order, and demand remains healthy supported by solid municipal budgets.

• Q: What is the potential timeline for an outcome from the Aerials strategic review? /

  A: There is no predetermined timeline. Management is focused on completing a thorough process and selecting the outcome that maximizes value for Terex shareholders, with progress ongoing and multiple interested parties. No estimated completion date is provided at this time.