Business Mix Improvements And Sector Headwinds Will Shape Equipment Demand Outlook

Key Takeaways

• Strong infrastructure investment, urbanization, and sustainability trends are boosting demand and visibility for Terex's equipment, supporting steady growth and resilience across diverse markets.
  
• Expansion into electrification, digital solutions, and new global markets, alongside operational synergies, is driving improved margins, recurring revenues, and long-term diversification.
  
• Shifting customer preferences, margin pressures, and macroeconomic uncertainty are driving sales declines, margin compression, and ongoing revenue and profitability risks across key Terex business segments.

Catalysts

Provides materials processing machinery and mobile elevating work platform worldwide.

• The sustained increase in global infrastructure and manufacturing investment-supported by recent policy incentives such as enhanced bonus depreciation and significant federal construction allocations-is driving multi-year demand for Terex's construction, utility, and materials processing equipment, positioning the company for steady revenue growth as both U.S. and international markets upgrade infrastructure and manufacturing capacity.
  
• Ongoing urbanization, megaproject launches, and the rise of large data center and manufacturing construction are expanding the need for new equipment and replacement cycles, fueling Terex's order backlog and providing above-average forward visibility and resilience, especially in sectors less exposed to economic cycles (waste, recycling, utilities).
  
• The company's acceleration of electrified and digital product offerings (Environmental Solutions growth, expansion of 3rd Eye telematics and SaaS subscriptions) is unlocking higher-margin, recurring revenues and enabling Terex to benefit from stricter sustainability and efficiency regulations-supporting margin expansion and differentiated pricing for next-generation equipment.
  
• Synergies and integration from the ESG acquisition are running ahead of schedule, driving greater operational efficiencies, cost reductions (through joint sourcing and footprint optimization), and incremental cross-selling opportunities, all of which are expected to improve operating margins and free cash flow conversion in the coming years.
  
• Continued global footprint expansion-particularly into high-growth markets like India, Southeast Asia, and Latin America-will drive incremental top-line growth and revenue diversification; early signs of recovery in Europe and new infrastructure initiatives in emerging markets support Terex's ability to capture growth from secular industrialization and urbanization trends.

Terex Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Terex's revenue will grow by 6.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.5% today to 8.5% in 3 years time.
• Analysts expect earnings to reach $525.7 million (and earnings per share of $6.42) by about September 2028, up from $179.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.6x on those 2028 earnings, down from 18.8x today. This future PE is lower than the current PE for the US Machinery industry at 24.7x.
• Analysts expect the number of shares outstanding to decline by 1.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.9%, as per the Simply Wall St company report.

Terex Future Earnings Per Share Growth

Risks

• Persistent high interest rates, macro uncertainty, and cautious capital spending by independent rental and smaller customers are delaying equipment purchases, particularly for construction and material processing; this poses downside risk to revenue and order growth into 2026.
  
• Tariff-related inflation (including Section 232 steel tariffs and EU reciprocal tariffs) and ongoing global trade negotiations are unpredictably increasing costs and compressing segment operating margins, particularly in Aerials and legacy businesses, which may weaken net margins and earnings.
  
• Competitive and customer mix headwinds in historically high-margin units (e.g., Aerials) are driving sustained margin compression and legacy sales declines (-12% YoY), demonstrating potential vulnerability to continued commoditization and cyclical swings, risking both revenue stability and profitability.
  
• Hesitation to convert rental fleets to owned equipment, combined with lengthening equipment replacement cycles, suggests that secular shifts toward rental models and customer uncertainty could suppress unit sales volume, creating long-term revenue and margin headwinds as customer preferences change.
  
• Weak economic environments, especially in Europe, and exposure to cyclical construction end markets continue to pressure sales and utilization in specific segments (e.g., MP, cranes), increasing the risk of earnings volatility and exposing the company to potential underutilization of its manufacturing footprint.

Valuation

• The analysts have a consensus price target of $55.2 for Terex based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $73.0, and the most bearish reporting a price target of just $38.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.1 billion, earnings will come to $525.7 million, and it would be trading on a PE ratio of 8.6x, assuming you use a discount rate of 9.9%.
• Given the current share price of $51.2, the analyst price target of $55.2 is 7.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.