On Dec 30, 2014, Zacks Investment Research downgraded commercial foodservice equipment manufacturer The Manitowoc Company, Inc. (MTW), to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).
Why the Downgrade?
On Oct 27, Manitowoc reported its third-quarter results wherein earnings declined 10% year over year to 36 cents per share, affected by lower crane demand. Total revenue was $986 million in the reported quarter, down 2.5% year over year as a decline in the Crane segment sales offset increase in the Foodservice sales.
Sales in the Crane segment declined 7% in the quarter due to a volume decrease primarily in the boom truck and rough-terrain crane markets. Ongoing global demand pressure, slower-than-anticipated recovery in the non-residential construction markets and lack of confidence in macroeconomic improvement continue to negatively impact segment revenues.
Manitowoc anticipates the Crane segment sales to decline to the mid-to high-single digits in 2014 with a 7% operating margin. Even though the company is trying to improve the segment’s operating profile, given the weak end-market conditions, margins may remain affected in the next few quarters.
The Foodservice segment witnessed weakness in some regions in the third quarter, such as Russia and Asia Pacific, as well as in certain product categories. The lack of food chain product rollouts in the quarter affected both top-line growth and operating margins. Asia-Pacific continues to be a drag on the segment’s performance as the U.S. chains have decided to reduce capital expenditure in the region due to weak demand.
The company maintained its earlier forecast for capital expenditure at $90 million for the year and retained depreciation and amortization projection of $120 million. Interest expenses are projected in the low-to-mid $90 million range.
Manitowoc’s long-term debt was $1.7 billion as of Sep 30, 2014, an increase from $1.5 billion as of Dec 31, 2013. Debt-to-capitalization ratio remained high at 67% as of the third-quarter end.
Following the third quarter earnings announcement, the Zacks Consensus Estimate for 2014 has gone down 18.7% to $1.22 per share. Likewise, the Zacks Consensus Estimate for 2015 fell 18% to $1.47 per share.
Other Stocks to Consider
Some other stocks in the same sector that warrant a look include ACCO Brands Corporation (ACCO), Alamo Group, Inc. (ALG) and Lindsay Corporation (LNN). All these stocks carry a Zacks Rank #1 (Strong Buy).
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