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Manitowoc (MTW) to Grow on Initiatives despite Weak Demand

On Aug 14, 2017, we issued an updated research report on The Manitowoc Company, Inc. MTW, a leading global manufacturer of cranes and lift solutions.

The company reported second-quarter 2017 adjusted earnings of 5 cents per share, up 67% year over year. After incurring losses for three consecutive quarters due to weak crane demand, the company has returned to profit in the second quarter. The year-over-year improvement was mainly driven by focus on consolidating manufacturing footprint and reducing cost of organizational structure.

Second-quarter orders were at $379.5 million, up 9% year over year despite challenging end markets. This includes receiving the first orders of approximately $11 million for the production of the U.S. Army contract. The first two units of this contract will be shipped in 2017. Backlog at quarter end was $491.2 million, a 25% year-over-year rise.

The company witnessed few sections of growth in specific markets within North America, such as the Permian and Eagle Ford basins. European markets continue to grow at a modest pace, underscored by residential and non-residential project activity. Manitowoc continues to drive new programs in the aftermarket business, which contributed around 20% of revenues in the reported quarter. The company remains focused on growing this part of the business.

Manitowoc hiked full-year 2017 financial guidance backed by first-half 2017 performance and expectations of revenue growth for the back half of the year. The company now anticipates revenues to decline approximately 5–7% year over year in 2017. Its previous guidance was a decline of between 8% and 10%. Adjusted EBITDA is forecasted to lie between $59 million and $69 million (previous guidance was between $41 million and $59 million).

The overall global market sentiment for lattice boom crawlers and rough-terrain cranes remains soft in the quarter. Demand continues to be muted in the Americas and the Middle East region due to weak rental and used equipment. Uncertainty among customers is mounting due to emerging market peers, apprehensions related to China’s growth outlook, persistently depressed oil prices and sluggish domestic growth.

Nevertheless, Manitowoc is making significant progress in the implementation of The Manitowoc Way to drive four key strategic priorities. The first part of the strategy is margin expansion. The company remains focused on cost controls, reducing headcount, increasing productivity and eliminating waste. The next strategic priority is growth. The company’s new product pipeline remains focused on integrating the changing customer needs.

The third key priority remains innovation. The company is poised to grow on its newly developed TMS 9000-2 truck-mounted cranes which are ready for shipment. Further, it continues investment in lattice boom crawler cranes despite current market conditions. An example of this is the enhancement to the MLC650 and its VP Max configuration of a newly designed 3.5-meter wide boom insert. This enables customers to complete jobs that require more reach from the standard product footprint, particularly in the ever-evolving wind industry. The fourth key strategic priority is velocity. The company applied these tools to grow its boom truck business, which is a highly customized crane with a variety of commercial truck configurations.

Manitowoc has an estimated long-term earnings growth rate of 15%. Other stocks in the industrial product space include AGCO Corporation AGCO, Terex Corporation TEX and Deere & Company DE. AGCO has expected long-term growth of 13.51%. Terex has an expected long-term growth of 19.67% and Deere & Company has an expected long-term growth of 9.17%.

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