Neutral on Manitowoc - Analyst Blog
04 Marzo 2013 - 6:46PM
Zacks
On Mar 1, we maintained our Neutral recommendation on
manufacturer of cranes and foodservice equipment, Manitowoc
Company, Inc. (MTW), given concerns regarding its high
debt levels, slowdown in Crane segment’s order rate and increased
competition in the Chinese market. Manitowoc retains a short-term
Zacks Rank #3 (Hold).
Why Reiterated?
Manitowoc reported fourth-quarter 2012 adjusted earnings of 27
cents per share, up 93% from 14 cents earned in the year ago
quarter. Total sales increased 10% year over year to $1.1 billion.
Both were ahead of the respective Zacks Consensus Estimates.
In 2013, foodservice revenues are expected to grow in a mid
single-digit and operating margins to improve in the mid teens
percentage.
In 2012, operating earnings for the Crane segment benefited
from higher sales volumes, pricing actions and favorable warranty
experience, partially offset by higher material costs, labor costs
and additional provisions for excess and obsolete inventory.
Management remains focused on expanding crane margins through
pricing, product cost takeouts, and manufacturing efficiencies. For
2013, the company expects operating margin in the high single-digit
percentage range for the segment. The company expects crane
revenues to grow in a high single-digit clip.
However, order growth rates in the crane segment continue to
be slow. Orders in the second half of 2012 were essentially flat on
a year-over-year basis.
Orders declined 19% to $544 million in the fourth quarter
compared with the prior-year quarter due to the impact of macro
uncertainty, destocking and pricing. Manitowoc needs to witness
order growth to achieve its target of high single-digit percentage
growth in the Crane segment. Given the economic uncertainty, this
seems to be a challenge.
The Enodis acquisition positioned Manitowoc among the world’s
leading designers and manufacturers of commercial foodservice
equipment and enhanced the foodservice segment's normalized growth
and operating margin potential.
Post-acquisition, the company continued to optimize the
product portfolio and cost structure of the segment. These
initiatives, along with introduction of innovative new products,
operational improvements, and Lean initiatives will lead to
long-term profitability improvements.
On the flipside, owing to the Enodis acquisition, the
company’s debt burden increased, constraining its ability to invest
in the business or return cash to shareholders.
Debt-to-capitalization ratio remained high at 75% as of Dec 31,
2012. The 2012 total debt reduction of $80 million fell short of
the company’s full-year target of $150 million to $200 million due
to the negative impact of a high volume of crane shipments
occurring very late in the fourth quarter. The company expects to
pay back more than $200 million in debt in 2013, which seems to be
a difficult task.
Furthermore, Manitowoc faces growing competition from a number
of crane manufacturers in the Chinese market including Zoomlion,
Sany and Fushun Excavator. Manitowoc must increase its market share
in the Chinese market to maintain its market leading position in
the emerging markets of China.
Other Stocks to Consider
Other industrial equipment makers with favorable Zacks rank
are H&E Equipment Services Inc. (HEES),
Deere & Company (DE) and CNH Global
NV (CNH), which retain a Zacks Rank #2 (Buy).
CNH GLOBAL NV (CNH): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
H&E EQUIP SVCS (HEES): Free Stock Analysis Report
MANITOWOC INC (MTW): Free Stock Analysis Report
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