Shares of Manitowoc Company, Inc. (MTW) hit a 52-week low of $17.72 on Oct 10 and eventually closed at $18.76 with a negative year-to-date return of 19.6%. The company’s share price dropped below the $30 mark following its weak Q2 results declared on Jul 30 and have lingered beneath it since then. However, the current fall is because of a weaker outlook for the third quarter, to be released on Oct 27.
What Led to the Drop?
Shares of Manitowoc dropped 12.87% in a day on Oct 10, following the company’s announcement of preliminary third-quarter 2014 results and outlook for the full year. The manufacturer of cranes and commercial foodservice equipment projects net sales to be just under $1 billion in the third quarter, whereas it reported net sales of $1.01 billion in the third quarter of 2013. Earnings before interest, amortization, restructuring, and tax are expected to decline 20% to $90 million.
The company stated that the third-quarter results have been challenged by weak global demand. Sales in the Crane segment bore the brunt of weak North American rough-terrain and boom truck markets. Latin America also remained weak. Foodservice witnessed weakness in some regions, such as Russia and Asia Pacific, as well as in certain product categories.
In the light of these factors, for 2014, Manitowoc projects Crane segment revenues to decline in the mid-to-high single-digit percentages year over year and operating margins to be in the 7% range. Foodservice segment revenues are expected to be up by low-to-mid single-digit percentages from 2013 levels. Segment operating margins are projected to be in the 15% range.
Manitowoc also adjusted its guidance for end-of-year debt-to-EBITDA to approximately 3.5 times from the previously expected 3 times and reduced its interest expense guidance to a low-to-mid $90 million range. The company reaffirmed its previously stated outlook for capital expenditures of approximately $90 million, depreciation & amortization of approximately $120 million and an effective tax rate in the mid-teens percentage range driven by expected third-quarter discrete items.
Manitowoc had reported second-quarter adjusted earnings from continuing operations of 35 cents per share, a 25.5% decline year over year from 47 cents, primarily impacted by lower crane demand. The bottom line also missed the Zacks Consensus Estimate of 41 cents.
The Zacks Consensus Estimate for Manitowoc has moved down 9% to 42 cents for the third quarter and 5% for 2014 over the past 7 days. A Zacks Rank #5 (Strong Sell) further confirms Manitowoc’s weakness.
Other Stocks to Consider
Some better-ranked stocks in the same sector include Middleby Corp. (MIDD), Manitex International, Inc. (MNTX) and Nordson Corporation (NDSN). All of these stocks carry a Zacks Rank #2 (Buy).
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