10-K: Terex Reports Mixed 2025 Results Amid Strategic Shifts

Terex Corporation reported a 5.7% increase in net sales for 2025, driven by acquisitions, but saw a decline in operating profit and EPS, alongside significant strategic portfolio adjustments.

Summary

• Net sales grew 5.7% to $5.421 billion in 2025, primarily due to the acquisition of the Environmental Solutions Group (ESG).
• Operating profit decreased by 9.7% to $475 million in 2025 compared to $526 million in 2024.
• Net income for 2025 was $221 million, down from $335 million in 2024, with diluted EPS at $3.33 compared to $4.96 in the prior year.
• Free cash flow reached $325 million in 2025, representing a 147% conversion rate.
• Working capital as a percentage of trailing three-month annualized sales improved to 20.8% at December 31, 2025, from 24.0% at December 31, 2024.
• The ESG acquisition, completed on October 8, 2024, contributed to strong ES segment performance, with sales increasing 105.7% year-over-year to $1.691 billion and operating margins of 13.8%.
• The Materials Processing (MP) segment experienced an 11.6% decrease in sales to $1.681 billion, but maintained a 13.9% operating margin, partly due to a gain on the sale of its tower and rough terrain cranes businesses.
• The Aerials segment saw a 14.5% decline in sales to $2.060 billion, with operating profit falling to 5.0% from 11.2% in 2024, impacted by lower demand, increased tariffs, and production adjustments.
• Overall backlog increased by $61 million to $2.352 billion at December 31, 2025, driven by Aerials and MP, partially offset by a decrease in ES backlog.
• The company completed the merger with REV Group, Inc. on February 2, 2026, issuing 48.1 million Terex shares and $426 million in cash.
• Terex ended 2025 with $1.6 billion in liquidity and repriced its term loan, lowering the interest rate by 25 basis points.
• Return on Invested Capital (ROIC) at December 31, 2025, was 11.7%.
• The company repurchased 1,360,706 shares of common stock for $53 million in 2025 and declared quarterly dividends of $0.17 per share.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a mixed report. While strategic acquisitions and strong free cash flow are positive, significant declines in operating profit and EPS, coupled with sales decreases in key segments like Aerials and MP, indicate underlying challenges despite overall revenue growth from M&A.

Positives

• Net sales increased by 5.7% to $5.421 billion in 2025, primarily driven by the ESG acquisition.
• Achieved strong free cash flow of $325 million, translating to a 147% conversion rate.
• Improved working capital efficiency, with net working capital as a percentage of trailing three-month annualized sales improving from 24.0% in 2024 to 20.8% in 2025.
• Successfully integrated the ESG acquisition, achieving $25 million in synergies ahead of commitment.
• The Environmental Solutions (ES) segment demonstrated significant sales growth of 105.7% year-over-year and strong operating margins of 13.8%.
• The Materials Processing (MP) segment ended 2025 with a 22% increase in backlog, providing positive momentum for 2026.
• MP segment maintained a solid operating margin of 13.9%, benefiting from tight cost control and a $41 million pre-tax gain on the sale of its tower and rough terrain cranes businesses.
• The Aerials segment showed a 7% year-over-year growth in the fourth quarter of 2025, driven by replacement demand from mega projects.
• Maintained robust liquidity of $1.6 billion with no near-term debt maturities.
• Repriced the term loan, resulting in a 25 basis point reduction in interest rate.
• Achieved a Return on Invested Capital (ROIC) of 11.7% at December 31, 2025.
• Continued commitment to developing and incorporating alternative power solutions (battery-electric, fuel-electric hybrid, plug-in hybrids) across product lines, aligning with sustainability goals.
• Delivered strongest safety performance to date in 2025, with a lost time injury rate of 0.39 and a total recordable injury rate of 1.40, progressing towards Zero Harm goals.
• High team member engagement, with 87% participation in the global engagement survey and positive net promoter and engagement scores.

Negatives

• Operating profit decreased by 9.7% to $475 million in 2025 compared to $526 million in 2024.
• Gross profit decreased by 1.6% to $1.051 billion in 2025, primarily due to lower sales volume in Aerials and MP, unfavorable absorption from production adjustments, and tariffs within Aerials.
• Net income decreased from $335 million in 2024 to $221 million in 2025, and diluted EPS declined from $4.96 to $3.33.
• The Materials Processing (MP) segment's sales decreased 11.6% year-over-year due to macro uncertainty, high interest rates impacting rent-to-own conversions, and weak European demand.
• The Aerials segment's sales declined 14.5% year-over-year, and its operating profit significantly decreased by 620 basis points (from 11.2% to 5.0%) due to lower sales volume, increased tariff expenses, production adjustments, and a one-time litigation-related charge.
• ES backlog decreased approximately 9% from December 31, 2024, driven by a return to historical pre-COVID ordering patterns with more available chassis.
• Interest expense, net of interest income, more than doubled to $165 million in 2025 from $76 million in 2024, primarily due to additional debt issued for the ESG acquisition.
• The effective tax rate increased to 24.3% in 2025 from 17.8% in 2024, mainly due to an increase in unfavorable discrete items, including a change in German tax legislation.
• Selling, General & Administrative (SG&A) expenses increased by $34 million, partly due to additional compensation costs from the ESG business, a one-time litigation-related charge, and higher restructuring and integration costs.

Risks

• Inability to successfully integrate acquired or merged businesses, including REV Group, Inc., and failure to realize anticipated benefits.
• Inability to effectively manage expanded operations following the completion of the REV Transaction.
• Potential divestitures and any retained liabilities related thereto may negatively impact the business and financial results.
• The timing and amount of benefits from strategic initiatives (Execute, Innovate, Grow) may not be as expected.
• The industry is highly competitive and subject to pricing pressure; failure to compete effectively could decrease demand and harm the business.
• Disruptions within the dealer network, including lack of exclusivity, increased bargaining power of consolidated dealers, and difficulties in terminating or not renewing agreements.
• The imposition of new, postponed, or increased international tariffs may have a material adverse effect on the business, financial condition, and results of operations.
• Business is sensitive to general economic conditions, government spending priorities, and the cyclical nature of markets served.
• Significant amount of outstanding debt and the need to comply with covenants contained in debt agreements, with potential for acceleration of indebtedness if covenants are breached.
• Inability to generate sufficient cash flow to service debt obligations and operate the business.
• Access to capital markets and borrowing capacity could be limited in certain circumstances, potentially due to credit rating downgrades or bank failures.
• Cancellations, reductions, or delays in customer orders, customer breaches of purchase agreements, reductions in expected backlog, or inability to meet customer delivery schedules.
• Currency exchange and translation risk due to multinational operations and reporting in U.S. dollars.
• The financial condition of customers and dealers and their continued access to capital, impacting product sales.
• Exposure to losses from providing credit support to some customers and dealers (guarantees).
• Potential for losses in excess of recorded reserves for receivables.
• The market price of common stock may be affected by factors different from those before the REV Transaction and may decline as a result of the REV Transaction.
• Political, economic, and other risks that arise from operating a multinational business (e.g., geopolitical instability, customs/tariffs, changes in tax laws, labor shortages, intellectual property protection, health epidemics).
• Changes in the availability and price of certain materials and components, resulting in significant disruptions to the supply chain, manufacturing inefficiencies, increased costs, and lower profits.
• Consolidation within the customer base and suppliers may negatively impact pricing and product margins.
• Business may suffer if equipment fails to perform as expected, leading to warranty claims, recalls, product liability, and reputational damage.
• A material disruption to one of the significant manufacturing plants may cause significant lost production and adversely affect results of operations.
• A failure of a key information technology system or a breach of information security from increased cybersecurity threats and more sophisticated computer crime, potentially exacerbated by AI technologies.
• Issues related to the development, deployment, and use of artificial intelligence technologies in business operations, information systems, products, and services, could result in reputational harm, financial harm, regulatory action, or legal liability.
• Increasing regulatory focus on privacy and data security issues and expanding laws could expose the company to increased liability.
• Product liability claims, litigation, and other liabilities, including anti-trust class action lawsuits.
• Violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar worldwide anti-corruption laws.
• Compliance with environmental, health, and safety laws and regulations, and potential significant costs or liabilities associated with a failure to meet sustainability or EHS requirements or expectations.
• Compliance with an injunction and related obligations imposed by the U.S. Securities and Exchange Commission (SEC) from a 2009 settlement and a separate administrative cease and desist order.
• Inability to attract, develop, engage, and retain qualified team members, including key management and skilled labor.
• Adverse impact from work stoppages and other labor matters, including unionization efforts.

Future Outlook

Terex expects 2026 sales to be between $7.5 billion and $8.1 billion, with EBITDA projected between $930 million and $1 billion, and earnings per share between $4.50 and $5.00, reflecting the higher share count from the REV transaction. The company anticipates stronger demand in the Utilities market, fueled by U.S. electrical grid needs and data center growth, and continued growth in the waste & recycling market. Infrastructure projects are also expected to provide significant opportunities from government spending. Second-half 2026 sales are projected to be higher than the first half, with Q2, Q3, and Q4 sales exceeding Q1. Capital expenditures for 2026 are estimated at approximately $185 million, including the REV business.

Management Comments

• Our teams delivered our strongest safety performance to date while maintaining reliable delivery of equipment and services.
• We remain focused on executing our strategic priorities by investing to expand our presence in resilient and profitable end markets.
• ESG continued to execute very well from higher throughput and profitability.
• MP executed well in 2025 despite a challenging macro environment.
• We are encouraged to see year over year 7% growth in the fourth quarter driven by replacement demand from mega projects.
• We continued to execute our capital allocation strategy in 2025 by driving more operational cash through tighter net working capital management and redeploying it to repurchase our shares opportunistically.
• Our key end markets remain resilient with reliable replacement and aftermarket demand, strengthened by the opportunity to differentiate through quality, technology and life-cycle support.
• We are operating in a complex environment with many macroeconomic variables and geo-political uncertainties and results could change negatively or positively.

Industry Context

StockSavvy.ai notes that Terex's strategic focus on resilient end markets like waste & recycling and utilities, coupled with its portfolio management through significant acquisitions (ESG, REV) and divestitures (cranes), positions it to navigate current macroeconomic uncertainties. The emphasis on electric and hybrid solutions aligns with broader industry trends towards sustainability and lower emissions, which is a key differentiator in competitive markets. The decline in Aerials sales, particularly from independent rental customers, reflects the sensitivity of smaller projects to high interest rates, a common challenge across the construction equipment rental sector. The Q4 growth in Aerials from 'mega projects' suggests a bifurcation in demand, with large-scale infrastructure continuing to drive activity.

Comparison to Industry Standards

• Terex's ROIC of 11.7% at December 31, 2025, provides a benchmark for capital efficiency within the industrial equipment manufacturing sector, comparable to peers like Caterpillar (CAT) or Deere & Company (DE).
• The 147% free cash flow conversion rate indicates strong operational cash generation, which can be assessed against industry leaders to gauge relative efficiency in converting earnings into cash.
• The decline in Aerials sales (14.5% YoY) and operating profit (620 basis points) suggests a performance potentially below some competitors who may have more diversified revenue streams or customer bases less exposed to interest-rate sensitive projects. Direct competitors in MEWPs include Oshkosh (JLG), Haulotte, and Linamar (Skyjack).
• The significant growth in the ES segment (105.7% YoY) due to the ESG acquisition positions Terex strongly against specialized waste and recycling equipment manufacturers such as Federal Signal (New Way) or Labrie.
• The 22% year-over-year increase in MP backlog, driven by aggregates replacement demand, indicates a healthy underlying market for crushing and screening equipment, aligning with trends observed by major players like Metso or Sandvik in the aggregates sector.

Corporate Governance

Legal Proceedings

• Involved in various legal proceedings, including product liability, general liability, workers compensation liability, employment, commercial, class actions, intellectual property, and tax litigation, arising in the normal course of operations.
• Currently engaged in various legal proceedings with respect to intellectual property rights, with the belief that outcomes will not have a material adverse effect on consolidated financial statements.
• In the early stages of industry anti-trust class action lawsuits where the company has been named a defendant; the company believes these are without merit and will vigorously oppose them, but cannot assure final resolution or damages.
• Subject to a 2009 SEC settlement that includes an injunction barring future violations of anti-fraud, books and records, reporting, and internal control provisions of federal securities laws.
• Consented to an administrative cease and desist order from the SEC prohibiting future violations of certain federal securities laws.

Stakeholder Impact

• Shareholders are impacted by the 9.7% decrease in operating profit and lower EPS, but also by the $98 million returned through share repurchases and dividends in 2025. The issuance of 48.1 million new shares for the REV Transaction will result in dilution.
• Employees (Team Members) benefit from the company's commitment to Zero Harm Safety, talent development programs, and a culture of inclusion, but face risks from potential work stoppages and labor matters.
• Customers are affected by the company's ability to meet delivery schedules amidst supply chain challenges and benefit from ongoing product innovation, including alternative power solutions and digital offerings.
• Suppliers may experience increased cost pressures due to consolidation within the supplier base and changes in the availability and price of materials and components.
• Creditors are impacted by the company's significant debt levels of $2.584 billion and the need to comply with financial covenants, although the company maintained compliance and repriced its term loan favorably.
• Communities benefit from the company's commitment to environmental stewardship and good global, local, and national citizenship.

Next Steps

• Integration of REV Group, Inc. business, with operating results to be reported as part of the Company beginning February 2, 2026.
• Initiate a strategic review process regarding the Aerials business, including a possible divestiture.
• Continue to build and actively pursue the inorganic investment pipeline.
• Invest approximately $185 million in capital expenditures in 2026, including in the REV business.
• Pay a $0.17 per share dividend on March 19, 2026, to stockholders of record as of March 6, 2026.
• Evaluate the financial statement impacts as additional Pillar Two rules are enacted and OECD guidance is issued.
• Continue to develop and incorporate alternative power solutions within different product lines.
• Maintain commitment to appropriate levels of research, development, and engineering spending.
• File the Proxy Statement with the SEC within 120 days after December 31, 2025, for the 2026 Annual Meeting of Stockholders.
• Include required disclosures for the REV Transaction business combination in the Quarterly Report on Form 10-Q for the period ending March 31, 2026.

Key Dates

Recommendation

While Terex demonstrates strategic agility through significant M&A activity (ESG acquisition, REV merger) and portfolio optimization (cranes divestiture), the 2025 financial results show a notable decline in operating profit and EPS, alongside sales weakness in key segments like Aerials and MP. The increased debt load and rising interest expenses are concerns. The 2026 outlook, while incorporating the REV merger, still faces macroeconomic uncertainties. The stock is a 'hold' as the long-term benefits of the strategic shifts need time to materialize and offset current operational headwinds and integration risks.

Keywords

Terex Corporation, TEX, 10-K, Annual Report, Industrial Equipment, Materials Processing, Waste and Recycling, Mobile Elevating Work Platforms, MEWPs, Aerial Work Platforms, Utility Equipment, SEC Filing, Financial Performance, Acquisition, Divestiture, REV Group, ESG, Financial Results, Backlog, Operating Profit, Free Cash Flow, ROIC, Debt, Share Repurchase, Dividends, Cybersecurity, Supply Chain, Tariffs, Corporate Governance, Risk Factors, Sustainability, Artificial Intelligence