On Jun 30, 2015, we issued an updated research report on The Manitowoc Company, Inc. MTW, a manufacturer and seller of cranes and related products as well as foodservice equipment worldwide.
In the first quarter of 2015, Manitowoc suffered a loss per share of 5 cents due to reduced capital spending by large restaurant chains, lower boom truck and rough-terrain revenues and impact of unfavorable foreign exchange on both Crane and Foodservice segments. The company had delivered earnings per share of 17 cents in the year-ago quarter.
Manitowoc has reaffirmed its outlook for the Crane segment and expects sales to dip in the mid-single digits in 2015 compared with 2014, whereas operating margins are projected to be in the high single-digit range. The company anticipates Foodservice segment revenues to remain approximately flat due to lower capital expenditure and higher start-up costs for the launch of KitchenCare. However, it is optimistic about segment operating margins for the full year, which are expected improve in the mid-teen percentage range.
An area of concern in 2015 is the potential impact of slump in crude oil prices on the crane market. Manitowoc’s products are used in many energy-related industries and, as the price of crude oil drops, the number of projects needing crane lifting activities tends to slow down. Moreover, the strengthening U.S. dollar is a headwind considering the negative impact it has on price competitiveness for Manitowoc’s U.S.-manufactured products versus its international competition.
Further, global weakness continues to negatively impact the rough-terrain and boom-truck markets, primarily in North America and Latin America. U.S. permits, rig count and well starts, all important drivers for the North American crane market, have been declining since Oct 2014.
The startup of the KitchenCare business has been riddled with challenges, including leadership changes, missteps in the company’s call center operations and parts stocking issues. These have led to higher start-up costs and, subsequently, had a negative impact on the business' operating earnings.
Moreover, large restaurant chains, particularly in Asia, are lowering their capital expenditure as they redefine their expansion priorities, thereby affecting the results of the Foodservice business.
Risks surround the proposed spin-off of the Foodservice business. These include substantial legal, accounting and professional fees that will be incurred even if the spin-off is not completed. Further, failure to either complete the transaction altogether or within the slated time would be poorly received by the markets. Moreover, the transaction may not deliver the expected financial or other benefits.
Manitowoc’s long-term debt was $1.6 billion while debt-to-capitalization ratio remained high at 69% as of first-quarter end.
Manitowoc’s estimates have undergone negative revisions in the last 60 days. The Zacks Consensus Estimate for fiscal 2015 has moved south 4% to 99 cents and for fiscal 2016 the same has dipped 5% to $1.26.
Manitowoc currently has a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Some stocks worth considering in the sector are Quanex Building Products Corporation NX, Astec Industries, Inc. ASTE and Owens Corning OC. Quanex Building sports a Zacks Rank #1 (Strong Buy), while Astec Industries and Owens Corning carry a Zacks Rank #2 (Buy).
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