Terex Is Back in the Black

Construction-equipment maker Terex (NYS: TEX) posted third-quarter results that exceeded analysts' expectations, on the back of growth in all its business segments. The company also raised its 2011 sales outlook. Let's take a closer look at all the action in its financials.

The numbers
The company reported $36.9 million in net income during the quarter, versus a loss of $95.8 million in the same quarter last year. Net sales also increased by a chest-thumping 68% to $1.8 billion.

The company's materials-process business saw another rock-solid quarter on the back of strong worldwide demand for larger capacity machines. Terex strengthened its performance with the $1.4 billion acquisition of Demag Cranes.

Things are looking up in the industry in general. Net income for competitor Caterpillar (NYS: CAT) also increased significantly, by 44% to $1.14 billion, mainly powered by demand from the need to replace aging equipment in the United States. Likewise, Deere (NYS: DE) saw its third-quarter net income rise 15% to $712.3 million from the previous year's quarter.

Net sales for Terex's aerial-works platform division increased by 58.9%, to $448.7 million. Internationally, demand improved for shipments to Europe and the Middle East. Income from operations stood 93% higher at $27.0 million, mainly because of increased sales volumes, which were partially offset by rising input costs.

Construction saw net sales increase 38.9%, to $395.4 million, driven by robust demand for backhoe loaders in Russia, compact equipment in central Europe, and trucks in developing markets including Russia and South Africa. However, the segment posted a loss of $6.4 million on the back of reduced demand for road-building products and because of costs linked to restructuring.

Net sales for cranes jumped 47.4%, to $543.6 million. Almost every crane type saw increased sales. U.S. sales more than doubled, and there was also stronger demand from China, India, and Germany.

Income from operations multiplied more than sixfold to $25.9, as a result of improved sales volumes and cost savings from restructuring activities.

Net sales for the material-handling and port-solutions segments stood at $256.0 million and included the earnings results of Demag Cranes from the date of the Aug. 16 acquisition. Strong net sales came primarily from Europe, particularly Germany. The segment did, however, incur losses of $2.6 million because of accounting procedures for its new acquisition.

Materials processing net sales increased 19.2% to $171.1 million, primarily because of strong machine and parts sales in Canada, Australia, and South Africa, with southern Europe being an exception. Income from operations increased by 20.3% to $12.4 million from increased sales volumes and better manufacturing utilization.

The road ahead
Now that Terex is back in the black, the company can shift its focus to growth. But some challenges still remain. Unlike most of its competitors, Terex has a harder time reaching consumers, because it lacks a network of independent retail dealers and sells most of its products to equipment-rental companies. Still, Terex's acquisition of Demag Cranes was an important signal that the company is pushing for growth, and its prospects are certainly looking much better today than they were a year ago.

The Foolish bottom line
Although there's a great deal of uncertainty in the global economy, Terex nevertheless delivered a great set of numbers. But I think any prolonged economic sluggishness could have a negative effect on this sector as a whole. It will be interesting to see how the next quarter pans out for Terex, but for now, I'm staying cautious and saving my ammunition for a better opportunity.

At the time thisarticle was published Fool contributor Keki Fatakia owns no shares in any of the companies mentioned in this article. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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