TEX Q2 Deep Dive: Margin Pressures Offset by Environmental Solutions Strength and Tariff Mitigation

August 12, 2025 at 23:23 PM EDT

TEX Cover Image

Lifting and material handling equipment company Terex (NYSE: TEX) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 7.6% year on year to $1.49 billion. The company’s full-year revenue guidance of $5.4 billion at the midpoint came in 1.2% above analysts’ estimates. Its non-GAAP profit of $1.49 per share was 6.5% above analysts’ consensus estimates.

Is now the time to buy TEX? Find out in our full research report (it’s free).

Terex (TEX) Q2 CY2025 Highlights:

Revenue: $1.49 billion vs analyst estimates of $1.44 billion (7.6% year-on-year growth, 3.4% beat)
Adjusted EPS: $1.49 vs analyst estimates of $1.40 (6.5% beat)
Adjusted EBITDA: $181.4 million vs analyst estimates of $192.9 million (12.2% margin, 6% miss)
The company reconfirmed its revenue guidance for the full year of $5.4 billion at the midpoint
Adjusted EPS guidance for the full year is $4.90 at the midpoint, beating analyst estimates by 4.8%
EBITDA guidance for the full year is $640 million at the midpoint, below analyst estimates of $687.2 million
Operating Margin: 8.7%, down from 14% in the same quarter last year
Organic Revenue rose 6.6% year on year vs analyst estimates of 4.9% growth (177 basis point beat)
Market Capitalization: $3.32 billion

StockStory’s Take

Terex’s second quarter saw mixed market reaction, despite the company exceeding Wall Street’s revenue and adjusted EPS expectations. Management highlighted robust performance in Environmental Solutions, which helped counteract headwinds in Aerials and declining operating margins. CEO Simon Meester emphasized that “strong performance in Environmental Solutions offset industry-wide headwinds in Aerials,” while CFO Jennifer Kong-Picarello cited improved throughput and operational efficiencies as key drivers within the Environmental Solutions division. However, the company faced significant margin compression, with operating margin dropping from last year, largely due to an unfavorable mix and tariff-related inflation.

Looking ahead, Terex’s guidance is shaped by expectations of resilient demand in Environmental Solutions and ongoing margin pressures elsewhere, particularly from tariffs and customer mix shifts. Management sees continued momentum in refuse and utility trucks, as well as progress on synergy realization from recent acquisitions. CFO Jennifer Kong-Picarello noted that “tariff mitigation actions will flow through more in Q4,” and CEO Simon Meester stated, “we are seeing early signs of transmission and distribution jobs ramping up, which should benefit our utilities segment.” The company remains cautious about independent rental customer demand and the timing of benefits from new U.S. bonus depreciation legislation.

Key Insights from Management’s Remarks

Management attributed Q2 results to strong Environmental Solutions growth and margin improvement, offset by weaker Aerials performance and higher tariff costs. Forward guidance reflects continued strength in Environmental Solutions, persistent margin headwinds, and the impact of recent trade policy changes.

Environmental Solutions momentum: Environmental Solutions delivered double-digit sales and margin growth, driven by improved throughput, operational efficiencies, and favorable product mix in utilities. Management highlighted the launch of new digital fleet monitoring modules, contributing to growing software-based revenue streams.
Aerials mix and margin pressure: The Aerials segment faced lower margins due to a greater proportion of national customer sales, which management said are less profitable than independent rentals. CFO Jennifer Kong-Picarello noted, “unfavorable customer mix… will put pressure on Aerials margins in the second half.”
Tariff-related headwinds: Tariff inflation on imported materials and new reciprocal tariffs, especially on steel and European imports, weighed on profitability. Management estimated the net impact of tariffs to be approximately $0.50 per share for the year, up from prior expectations, despite mitigation efforts through supplier negotiations and preemptive inventory moves.
Synergy progress from ESG acquisition: Terex is running ahead of schedule in realizing synergies from the Environmental Solutions Group (ESG) acquisition. Management cited extending ESG’s digital 3rd Eye platform to other product lines and leveraging scale for sourcing savings as key achievements, which are expected to contribute more in future periods.
Diversified end-market exposure: Over half of Terex’s revenue now comes from less-cyclical end markets like waste, recycling, and utilities, reducing reliance on general construction. Management pointed to continued strength in large infrastructure projects and resilience in utilities, while private construction remains subdued.

Drivers of Future Performance

Terex expects future performance to hinge on Environmental Solutions momentum, tariff mitigation, and end-market shifts, with a focus on margin management and operational synergies.

Tariff mitigation and cost control: Management is executing a multi-pronged strategy to offset tariff costs, including supplier negotiations, reengineering, and selective price increases. CFO Jennifer Kong-Picarello noted that mitigation actions will be more pronounced in the fourth quarter, helping to alleviate some cost pressures. However, higher tariffs on steel and European imports will remain a headwind, and management does not expect material relief in the near term.
Environmental Solutions and digital offerings: The company is optimistic about continued growth in Environmental Solutions, powered by demand for refuse and utility vehicles and the expansion of digital platforms like 3rd Eye. CEO Simon Meester highlighted early adoption of new modules for fleet management and operator safety, which are creating recurring software revenue streams and cross-selling opportunities across product lines.
Infrastructure and bonus depreciation impact: Management expects sustained demand from large infrastructure and manufacturing projects to support equipment sales, aided by new U.S. tax incentives such as 100% bonus depreciation. However, the timing of incremental demand is uncertain, with CEO Meester cautioning that “most companies are just trying to figure out what the cash benefits are going to be, what the tariff headwinds are going to be.”

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace of Environmental Solutions’ margin and revenue growth as operational synergies from the ESG acquisition materialize, (2) the effectiveness of tariff mitigation strategies and how quickly cost savings are realized, and (3) signs of a rebound in Aerials and Materials Processing as macro uncertainty and end-market caution persist. The impact of recent U.S. tax incentives and infrastructure spending will also be key indicators to track.

Terex currently trades at $50.60, up from $49.87 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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