Image source: Terex investor presentation.

Crane producer Terex (TEX -3.42%) posted fourth-quarter earnings results on Feb. 16 that showed growing strain from an extremely weak global selling environment. Sales shrunk by double digits, and profits plunged by nearly one-third.

Here's a detailed look at how the headline results stacked up against the prior-year period:


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


$1.58 billion

$1.79 billion


Net Income

$55 million

$80 million






Data source: Terex financial filings.

What happened this quarter?
The revenue decline accelerated from the third quarter's 6% drop to hit 12%, as customers around the world delayed equipment purchases while their industries shrank. Key financial and operation highlights of the fourth quarter include:

  • Sales fell across all of Terex's regions, but its worst geographic market was Latin America, where revenue plunged by 21% on a currency-adjusted basis. The North American market, which accounts for more than 40% of sales, fell by 4%, and Western Europe, at 30% of sales, fell by 6%.
  • Operating margin worsened to 5.8% from 6.6% last year.
  • Backlog declined by 13%, suggesting further sales declines ahead.
  • Return on invested capital dove to 7% from 11%.
  • Free cash flow improved to $247 million from $226 million.

What management had to say
"The macro operating environment in the fourth quarter was challenging," CEO John Garrison said in a press release. "Global economic volatility has made our customers more cautious overall," he continued, "resulting in fourth quarter order activity that was below expectations in most business segments and product categories."

On a positive note, executives were happy with the company's improving cash flow for the year, and believe that they can carry that momentum into 2016. "Cash flow generation will be a primary focus going forward," Garrison said.

Meanwhile, management doesn't see the harsh operating environment changing over the year ahead, particularly as falling commodity prices hold back customers' investment in that industry. "We do not see [overall] market conditions improving [in 2016]," Garrison said. "The oil and gas and commodity market decline will continue to impact demand across many of our products." 

Looking forward
Thanks to that weakening demand picture, Terex projected a further 15% revenue decline across its aerial work platform, crane, and construction segments. Overall, net revenue should fall by about 10% in 2016, following last year's 11% decline. Operating margin will also tick lower, executives said, to below 6%.

While the company rides out this tough secular industry decline, Terex's priorities will be investing in new product development, improving its manufacturing footprint and supply chain, and slicing expenses through restructuring initiatives.

At the same time, Terex remains in confidential discussions with Chinese crane manufacturer Zoomlion, which confirmed on Tuesday that it recently made an offer to purchase the company for $30 per share. Terex is still reviewing that unsolicited bid, but management likely will stick to the merger agreement with Finland-based Konecranes Plc that it struck last August.