John L. Garrison

Materials handling manufacturer Terex has been praised for its capital allocation strategy. Stock analyst Zacks Equity Research notes that Terex's focus on portfolio restructuring and cost-saving initiatives is likely to boost results in the near term.

The analysis comes in the wake of the release of the company's second quarter 2017 results, which showed an income decline from USD60.6 million last year to USD49.6 million.

"We continue to make progress," says John L. Garrison, Terex president and CEO. "Our Cranes segment returned to profitability in the second quarter, realising benefits from its restructuring program. Our Materials Processing segment continued its excellent performance, growing sales and operating margin for the third consecutive quarter. Aerial Work Platforms sales were better than expected on the strength of the North American market; however, operating margins compressed on pricing dynamics, higher steel costs and the strength of the US dollar.

"Looking forward, backlog in our three segments grew substantially, up 36% year-over-year. This is the second consecutive quarter that we increased backlog in each segment," he adds. "AWP backlog grew 46% including growth in North America, Europe and Asia. MP backlog was up 33% and Cranes backlog grew 29%.

"We continue to implement our strategy to focus and simplify the company, and build capabilities in key commercial and operational areas.

"By completing the sales of our UK and Indian backhoe loader businesses, we delivered on our commitment to focus our portfolio on our three core segments. In Germany, we signed an agreement to sell our cranes manufacturing location in Bierbach, and reached agreement with the Works Council to proceed with our footprint rationalisation and cost reduction plans. Our ongoing efforts to expand our capabilities in sales execution and account management through our Commercial Excellence initiative is starting to be reflected in our growing bookings and backlog."

Garrison also notes the impact of the sale of Konecranes shares which saw Terex repurchase 9.4 million of its own shares for USD316 million, "bringing our total to 15.9 million shares ... for the first six months of the year".

The analyst notes that Terex has outperformed the industry in the last year, raising its share value by 56.7% against the industry average of 35.4% in the period.