Terex Corporation (TEX) Cash Flow Statement

The OCF/NI ratio of 3.25 in 2025Q4 suggests strong cash conversion, but the subsequent quarter's ratio of 0.35, alongside a net loss, reveals that earnings are not consistently translating into cash. Working capital changes were the primary driver, with a $154M positive contribution in 2025Q4 versus a $122M negative swing in 2026Q1. This volatility implies that reported profits may not be a reliable indicator of cash generation, and investors should monitor the sustainability of working capital adjustments.

The trajectory shows a sharp recovery in FCF, but the margin compression suggests that the revenue surge in 2026Q2 is not translating proportionally into cash generation. Compared to net income of $110M, FCF of $95M indicates a modest gap, but the prior quarter's loss and negative FCF highlight the cyclicality. The 2025Q4 FCF margin of 13.0% appears to be an outlier, and the current level may reflect increased working capital needs or higher capex intensity.

The capex-to-revenue ratio has been relatively stable, hovering between 1.5% and 3.9%, which is low for an industrial manufacturer. This may indicate that Terex is not investing heavily in growth capacity, potentially limiting future expansion. The consistency of capex despite revenue volatility suggests a disciplined approach, but it also raises questions about whether the company is adequately investing to maintain its asset base, especially given the D&A figures that are roughly double capex in some quarters.

The working capital swings are the primary driver of operating cash flow variability, with large positive contributions in some quarters (e.g., $154M in 2025Q4) and negative in others (e.g., -$122M in 2026Q1). This pattern suggests that Terex's cash flow is heavily influenced by timing of receivables, inventory, and payables, which may not be sustainable. The negative working capital changes in 2026Q1 and 2025Q1 coincide with revenue troughs, implying that the company may be drawing down working capital to support operations during weak demand.

The acquisition outflow of $467M in 2026Q2 is a significant deployment of capital, dwarfing the $95M in FCF generated that quarter. This suggests that Terex is relying on external financing or cash reserves to fund M&A, which could strain the balance sheet. Dividends have been consistent, but buybacks have been minimal, with only $1M in 2025Q4 and $23M in 2025Q2. The focus on acquisitions may indicate a strategic pivot, but investors should monitor the integration risk and the impact on leverage.

The cumulative OCF is nearly double cumulative net income, which might suggest high earnings quality, but the divergence is not smooth. The large positive working capital adjustments in 2025Q4 and 2024Q4 inflate OCF, while negative adjustments in other quarters reduce it. This pattern implies that the cash generation is not a steady reflection of profitability but rather a result of timing. The 2024Q4 acquisition of $2B (net) further complicates the picture, as it may have distorted the cash flow statement.