Manitowoc Company, Inc. (MTW) reported second-quarter 2013 adjusted earnings from continuing operations of 45 cents per share, up 32% from 34 cents in the year-earlier quarter. The improvement was driven by implementation of strategic initiatives. The results surpassed the Zacks Consensus Estimate of 36 cents.
On a reported basis, earnings from continuing operations were 43 cents a share compared with 34 cents per share in the year-ago quarter.
Operational Update
Total revenue was $1046.6 million in the reported quarter, up 5% year over year, on increased Crane segment sales. However, the revenues fell short of the Zacks Consensus Estimate of $1064 million.
Cost of sales increased 3.7% to $773.8 million in the second quarter from $746 million in the year-ago quarter. Gross profit improved 8.6% year over year to $272.8 million. Consequently, gross margin expanded 80 basis points (bps) to 26% in the quarter.
Engineering, selling and administrative expenses crept up 7.8% year over year to $161 million. Operating income excluding restructuring charges was 102.5 million, up 11% year over year, leading to 55 bps expansion in operating margin to 9.8%.
Segmental Performance
Revenues from the Crane and Related Products segment increased 7.6% year over year to $656.9 million in the reported quarter, driven by continued growth in the American region, as well as strong results from crane care. The segment’s operating income rose 25% year over year to $65 million on higher sales volume, management of cost structure as well as improved operational efficiency.
Foodservice Equipment segment revenues were $389.7 million in the quarter compared with $386.5 million in the prior-year quarter. The improvement was mainly backed by sales of new products and growth in the Americas and EMEA regions. The segment’s operating income dropped 4.7% year over year to $63 million.
Backlog
Backlog in the Crane segment dropped 6% in the second quarter to $726 million from $776 million in the first quarter of 2013. Total orders were $604 million, slightly below the prior-year quarter.
Financial Update
As of Jun 30, 2013, cash and temporary investments amounted to $94.4 million versus $76.1 million as of Dec 31, 2012. Long-term debt was $1.8 billion as of Jun 30, 2013, compared with $1.73 billion as of Dec 31, 2012. Debt-to-capitalization ratio remained high at 74% as of Jun 30, 2013, a tad improvement from 75% as of Dec 31, 2012.
Cash flow from operating activities was $47.5 million in the quarter versus $6.6 million in the prior-year quarter. Capital expenditure was $25.7 million in the quarter compared with $20.5 million in the year-ago quarter.
Outlook
For full-year 2013, Manitowoc maintains its high single-digit growth forecast for Crane revenues and mid single-digit growth for Foodservice. The company also reiterated its forecast of high single-digit improvement in operating margins in the Crane segment and mid-teens gains in the Foodservice segment.
Capital expenditure projection also remains at $100 million for the year. Manitowoc also reaffirmed the outlook for depreciation and amortization, which will be $115 million for 2013. Interest expenses are expected at $125 million while debt reduction is targeted to exceed $200 million.
Our view
Crane demand is expected to increase significantly, aided by the new highway bill and a turnaround in the construction sector. The segment will be benefited by innovation of new products and services. Continuous focus on quality to enhance crane designs and product reliability will drive market share in the coming years. The Foodservice segment will be assisted by market dominance. Margins for both the Crane and Foodservice segments are expected to improve in fiscal 2013. However, high debt levels will be headwinds, moving ahead.
Manitowoc, WI-based Manitowoc is one of the world's leading innovators and manufacturers of commercial foodservice equipment. The company is one of the premier innovators and providers of crawler cranes, tower cranes, and mobile cranes for the heavy construction industry. These are complemented by a slate of industry-leading product support services. Manitowoc currently retains a Zacks Rank #4 (Sell).
Peer Performance
Among Manitowoc’s peers, Astec Industries, Inc. (ASTE) reported second-quarter 2013 earnings of 48 cents per share, up 17% from 41 cents in the year-earlier quarter. The results missed the Zacks Consensus Estimate of 55 cents. Terex Corp. (TEX) posted second-quarter 2013 adjusted earnings of 65 cents per share, down 13% from 75 cents earned in the year-ago quarter, but ahead of the Zacks Consensus Estimate of 54 cents. On the other hand, Caterpillar Inc.’s (CAT) earnings slumped 43% to $1.45 per share and were nowhere near the Zacks Consensus Estimate of $1.70.
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