Capital equipment specialist Terex (NYSE:TEX) posted fourth-quarter and full-year 2016 results this week. As expected, earnings were hurt by weak industry demand and huge charges tied to its restructuring initiatives. Yet the company made important progress toward simplifying its portfolio and lowering its cost structure so that it has a good shot to return to profitability in 2017.

Here's a look at how the headline results compare against the prior year:


Q4 2016

Q4 2015

Year-Over-Year Change


$975 million

$1.17 billion


Net income

($267 million)

$17 million






Data source: Terex financial filings.

What happened this quarter?

Sales slumped by double digits, which met management's low expectations but marked only the slightest improvement from the prior quarter's 19% dive.

A crane driving on a road at sunset.

Image source: Terex.

Key highlights of the quarter include:

  • The crane business endured a 20% sales decline and produced a $280 million loss that was severely inflated by restructuring charges. Adjusting for those one-time expenses, the division remained in the red by posting a $7 million loss as capital replacement rates dove.
  • Aerial work platform demand dropped 18% while profitability was cut nearly in half to 5% of sales.
  • The materials processing division fell slightly, but cost cuts helped push segment profitability up to 10% of sales from 6% in the prior-year period.
  • Sales fell by 22% in Western Europe, rose in the Asia-Pacific region, and declined by 13% in North America, which accounts for roughly half of Terex's business.
  • Terex made several improvements to its balance sheet, including reducing debt by nearly 40% and refinancing remaining debt so that annual interest expenses will be at least $35 million lower going forward.
  • Management boosted Terex's share repurchase program and raised the dividend by 14% to $0.08 per share.

What management had to say

"Our fourth quarter results were in line with our expectations and reflect the challenging global market conditions," CEO John Garrison said in a press release. While executives have no control over industry trends, they did make several big moves aimed at reducing the size of the business to reflect lower sales volumes.

"We completed the sale of our [materials handling and processing] business, initiated major restructuring actions within our Cranes segment, and dramatically improved our balance sheet," Garrison explained. "We continue to implement our strategy, to focus and simplify the company, and build capabilities in key commercial and operational areas."

Looking forward

Executives see Terex's major markets continuing to decline in 2017. Both the aerial work platform and crane divisions will sink by around 11%, they project, as the materials processing segment ticks higher on improving demand in the construction market.

Overall, Garrison and his team see revenue falling 11% thanks to stubbornly weak replacement demand. Profitability should tick down to 4.5% of sales from 4.7%. Yet this year's dramatic cost-cutting and brand sales will likely produce decent financial results despite the operating slump. Terex believes it will generate between $0.60 per share and $0.80 per share for the year.

That's far below the $1.33 per share it booked as recently as 2015, but would still represent a solid improvement over last year's $1.63-per-share loss. At the same time, investors will see modest direct benefits from Terex's improved finances as the company ramps up its cash returns through a higher dividend and more spending on stock buybacks.

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