After the hoopla surrounding President Obama's $800 billion stimulus package, complete with his symbolic visit to a Caterpillar
Because Caterpillar CEO Jim Owens estimated that only 20% of the sum would fund activities relevant to his industry, I had my doubts, but I was shocked to find zero mention of the plan in Terex's 15-page earnings report released this week. The word stimulus appears precisely once, referencing (surprise!) China's stimulus spending and its positive impact on demand for cranes.
The silence is deafening. In the context of Terex trimming revenue guidance for this year an additional 10% for a 40% to 45% reduction, I'd expected the plan to be mentioned if it were to help with demand for domestic equipment. Why do I get the feeling I'll have to update my ongoing crisis tally, sooner than I'd hoped, to include stimulus round II?
Perhaps I'm procrastinating because I'd rather avoid telling you just how horrific Terex's quarterly results were and what they convey about the worsening downturn. Terex's gross margin was sliced nearly in half as plummeting sales volumes cut net sales by 45% to $1.3 billion. From a net gain of $163 million a year ago, the company swung to a net loss of $75 million.
Noting that some sectors are generating 75% fewer sales than last year, Terex management revealed sharp deterioration across all business units. Construction equipment, which now includes road-building machines, logged the largest operating loss at nearly $84 million, while aerial work platforms experienced the steepest decline with a 64% cut in adjusted net sales.
Terex's dwindling backlog caused my Foolish heart to skip a beat because equipment backlogs provide one of the more holistic and forward-looking barometers of global economic activity. Nearly one-third of the total backlog has eroded just since the fourth quarter of 2008, while orders are down 59% from year-ago levels. Joy Global