Standard and Poors as of March 17, 2012 has rated MTW with 5 stars, which indicates a Stong Buy. Thought everyone should know. I am sure many of you do already. There were will be ups and downs with this issue but the trend will be up.
ä We expect revenues to rise 14% in 2012, following a 16% gain in 2011. We see crane sales improving by 19% in 2012 and foodservice equipment by 8%, after gains of 24% and 7% were posted, respectively, in 2011. MTW's crane orders have picked up since very late in 2010, with crane backlog rising 33% from a year earlier to $761 million at 2011 year-end. On our outlook for further economic gains, we see crane sales rebounding over the next few years. We also see a more favorable economy, new products and geographic penetration leading to a period of growth in foodservice equipment. ä We see wider margins in 2012, on our outlook for higher sales and more synergies from the late 2008 purchase of foodservice equipment maker Enodis. We see these factors outweighing some likely material cost pressures. ä Our 2012 EPS forecast of $1.10 compares with operating EPS of $0.38 in 2011. In January 2012, MTW discovered an error in its purchase accounting for the Enodis acquisition, and revised its 2009 and 2010 financial statements (along with certain minor prior period adjustments). This improved earnings for 2009 by $35.2 million and reduced earnings for 2010 by $6.1 million. Investment Rationale/Risk ä MTW has faced major business challenges in recent years, and took on a very heavy debt load in its 2008 takeover of Enodis. However, we think its business is in the early stages of recovery. We also think MTW has been greatly aided by its renegotiation and refinancing of $4.5 billion of loans and notes since mid-2009; it has also paid down about $1.2 billion of debt since acquiring Enodis. Based on these factors and our valuation model, we find the shares significantly undervalued. ä Risks to our recommendation and target price include insufficient liquidity, and a resumption of the downturn in the global economy. ä MTW recently traded at about 14X our 2012 EPS estimate, which is in the bottom half of its range at a similar stage of its last business revival. We think a much higher valuation is merited, as we believe MTW's crane business is poised to start a strong recovery, and its expanded foodservice operations are in a growth mode and will reduce its cyclicality to an extent. Our 12-month target price is $22, or 20X our 2012 EPS forecast, and the top half of its typical midcycle valuation