Terex (TEX) Q1 2026 earnings review
REV Merger Drives Top-Line Surge, But Aerials Margins Collapse
Terex delivered $1.7 billion in Q1 revenue (+41% YoY), heavily boosted by the first 58 days of the REV Group integration, now operating as the Specialty Vehicles (SV) segment. Proforma sales grew a healthy 11%, showing solid underlying demand. However, the top-line beat masks a severe profitability issue in the legacy Aerials business, where tariffs and unfavorable mix crushed Adjusted EBITDA margins to a near-breakeven 0.1%. While GAAP Net Income swung to an $89 million loss due to merger-related and non-cash charges, Adjusted EPS grew to $0.98 from $0.83 a year ago. The company reaffirmed its FY26 guidance, projecting $930 million to $1 billion in EBITDA, leaning heavily on the newly acquired SV segment and a rebounding Materials Processing division to carry the load.
🐂 Bull Case
The REV Group merger is already paying off. In just 58 days, the SV segment generated $436 million in revenue and $62 million in Adjusted EBITDA (14.2% margin), instantly diversifying Terex away from cyclical construction markets.
Total backlog increased sequentially to $7.1 billion, and Q1 book-to-bill hit 109%. Proforma bookings are up 14% on a rolling six-month basis, heavily de-risking the reaffirmed FY26 revenue guidance.
🐻 Bear Case
Despite a 4.2% increase in segment sales, Aerials Adjusted EBITDA collapsed from $20 million in 25Q1 to zero in 26Q1. Tariffs and unfavorable mix are severely eroding the bottom line in this legacy business.
GAAP Net Income was negative $89 million due to $93 million in continuing operations losses tied to merger charges. Furthermore, diluted share count has ballooned from 66.9 million to 96.1 million YoY.
⚖️ Verdict: ⚪
Cautiously Bullish. The structural pivot toward less-cyclical, higher-margin Specialty Vehicles is executing exactly as planned, and Materials Processing is rebounding. However, the complete margin collapse in Aerials demands close monitoring and accelerates the urgency of the previously announced strategic review for that segment.
Key Themes
Specialty Vehicles: A Strong Out-of-the-Gate Performance
Accelerating. The newly formed Specialty Vehicles (SV) segment (formerly REV Group) contributed $436 million in sales and $62 million in Adjusted EBITDA in its first 58 days. Proforma sales for the segment grew 20% YoY. Delivering a 14.2% Adjusted EBITDA margin right out of the gate proves the accretive nature of this acquisition and validates management's shift toward resilient end markets like emergency vehicles.
Aerials Margin Collapse Contradicts Sales Growth
Reversing. A major red flag emerged in the Aerials segment. While management touted a 4.2% YoY increase in Aerials sales ($469M), Adjusted EBITDA margin plummeted from 4.4% a year ago to 0.1% (effectively breakeven). This contradicts the positive volume narrative, proving that current pricing is entirely failing to offset new tariffs and unfavorable product mix. If volume gains can't translate to profit, the segment becomes dead weight.
Materials Processing Rebound
Accelerating. Following quarters of channel destocking and weakness, Materials Processing (MP) surged back. Proforma sales increased 18.3% YoY, and Adjusted EBITDA grew from $43 million to $63 million. The Adjusted EBITDA margin expanded significantly from 11.2% to 15.0%, driven by higher volumes, price realization, and operational efficiencies.
Macro Tailwinds vs Tariff Headwinds
Stable. The macro picture remains a tale of two forces. Infrastructure spending continues to drive strong MP and Utilities demand. Conversely, tariffs remain a heavy anchor. Management noted the recent change in Section 232 tariffs is expected to be 'negligible' moving forward because most US sales are manufactured domestically, but Aerials clearly absorbed a massive blow this quarter from tariffs not present a year ago.
Deal Costs Drag Down GAAP Earnings
Stable. The financial friction of the REV merger was highly visible this quarter. Total operating loss was $82 million on a GAAP basis, driven by $47 million in amortization of purchased intangibles and $166 million in purchase price accounting adjustments. While these are largely non-cash and non-recurring, they highlight the messy financial transition the company is navigating.
Utilities Backlog and Synergies
Stable. The Environmental Solutions segment grew sales 3.3% to $412 million, driven by strong throughput in utilities products. Adjusted EBITDA margin slightly decelerated to 18.0% from 20.3% due to product mix, but management noted synergy realization from the ESG integration is continuing to buoy results.
3rd Eye Digital Platform Expansion
Stable. Though not explicitly quantified in the Q1 release, the underlying technology integration continues. Terex's 3rd Eye digital platform (telematics and safety cameras) is a key strategic asset being expanded into the newly acquired REV vehicle verticals, representing a high-margin SaaS revenue opportunity as integration deepens.
Other KPIs
Accelerating. The addition of REV Group's massive backlog (previously cited at around $4.5B) combined with strong Q1 bookings ($2.1 billion) pushed total backlog to $7.1 billion. The 109% book-to-bill ratio provides exceptional forward revenue visibility for the remainder of FY26.
Stable. FCF outflow was $57 million, essentially flat compared to a $55 million outflow in Q1 2025. Q1 is historically the seasonal low point for Terex cash generation due to working capital builds. Net working capital efficiency improved by 930 basis points YoY to 16.7%, largely benefiting from the SV addition.
Decelerating. Total liquidity (cash plus revolver availability) dropped from $1.6 billion at the end of FY25 to $1.0 billion, primarily due to the cash consideration paid out to close the REV Group merger in February 2026. Still, $1B provides ample runway for operations.
Guidance
Accelerating. Reaffirmed guidance implies a proforma growth rate of ~5% YoY. The baseline assumes 11 months of Specialty Vehicles contribution, flat Aerials sales, mid-single-digit growth in Environmental Solutions, and high-single-digit growth in Materials Processing.
Accelerating. Represents an expected ~12% proforma YoY growth ($100 million increase), targeting a 12.4% margin at the midpoint. This bakes in roughly $28 million in realized synergies for 2026 from the REV merger, keeping the company on track for its $75 million run-rate target within 24 months.
Stable. The guidance range reflects the new share count reality. The 2026 full-year average shares outstanding is projected at 111 million (and ~115 million for Q2-Q4), up substantially from the mid-60 million range historically, causing near-term EPS dilution despite higher total net income.
Key Questions
Aerials Strategic Review Timeline
With the Aerials segment's Adjusted EBITDA margin collapsing to zero in Q1 due to tariffs, has the timeline or expected valuation for the previously announced strategic exit/spin-off of this business been negatively impacted?
Tariff Mitigation Progress
You noted that newly announced 232 tariff changes will have a negligible impact, but Aerials was heavily hit this quarter by tariffs not present a year ago. What specific pricing or supply chain actions are being taken to recover the 400+ bps of margin lost in Aerials?
Specialty Vehicles Organic Growth
SV delivered a massive 20% proforma sales growth in Q1, partly due to weather-related delivery timing. How much of this growth was pulled forward, and what is a normalized quarterly run-rate for this segment heading into Q2 and Q3?