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Why Terex Corporation Stock Dropped 10%

By Rich Smith – Aug 1, 2018 at 6:34PM

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Terex did, however, beat on earnings and grow sales -- and it looks likely to keep on doing so.

What happened

Shares of Terex Corporation (TEX 1.35%) closed 10.1% lower on Wednesday, even as the construction equipment maker reported Q2 earnings that met or exceeded Wall Street's expectations.

Sales for the fiscal quarter came in at $1.4 billion, in line with expectations. GAAP profits for the quarter were only $0.75 per share, but Terex said its pro forma number was better -- $0.98 per share -- and ahead of analysts' expected  $0.90 profit.

Three cranes against a blue and white sky

Terex makes cranes -- but it couldn't lift its own share price today. Image source: Getty Images.

So what

Year over year, Terex's earnings dropped, falling 28% from the $1.04 per share it earned in Q2 last year. Sales for the quarter leapt 19%, however. Even better, Terex said its backlog of new orders awaiting fulfillment grew 31%, which implies further sales growth down the line.

Now what

Terex updated its guidance for the rest of this year, raising the floor on the range of earnings it expects to make. Earnings are now expected to come in between $2.80 and $3 per share, adjusted for one-time items (i.e., pro forma).

That range neatly brackets the $2.90 per share that analysts were already predicting  the company would earn before this report came out. So with Terex beating on earnings, growing sales strongly, and raising guidance, I can't for the life of me figure out what investors are so upset about.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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