Will Manitowoc's (MTW) Right Sizing Actions Boost Margins?
On Apr 8, 2016, we issued an updated research report on The Manitowoc Company, Inc. MTW, a manufacturer and seller of cranes and related products. The current global economic environment is affecting Manitowoc’s customer demand unlike any cycle seen in the past.
Looking back at Manitowoc’s fourth-quarter 2015 results, its adjusted earnings per share increased 59% to 43 cents. Total revenue was $935 million in the reported quarter, down 10% year over year due to lackluster performance by the Crane segment.
Backlog in the Crane segment in the fourth quarter was $513 million, down from $738 million in the third quarter. Book-to-bill ratio was 0.8. Total orders were $424 million, down from $686 million in the third quarter of 2014.
The Crane segment is seeing mounting uncertainty among customers due to emerging market peers, doubts over Chinese growth outlook, persistently depressed oil prices and slowing domestic growth. More specifically, rough terrain cranes and boom truck demand in North America continue to be the worst hit, given the exposure to oil, gas and infrastructure projects. In 2016, Manitowoc Cranes expects revenues to be flat year over year and operating margin at approximately 4%. Moreover, Manitowoc continued to suffer from a strengthening of the U.S. dollar against other global currencies.
Manitowoc has announced plans to right-size the independent Cranes business and increase operating efficiencies to meet demand levels this year. These actions are expected to help enhance the company’s margins and boost profitability.
Right-sizing activities will include headcount reductions in the company’s Shady Grove, PA and Manitowoc, WI facilities, plant rationalizations, and other cost optimization initiatives. These are in addition to the activities announced in late 2015. Manitowoc will provide greater clarity on expected costs and savings due to these actions on its first-quarter 2016 earnings call.
Meanwhile, Manitowoc has successfully completed the spin-off of its wholly owned subsidiary, Manitowoc Foodservice, which has started trading as a stand-alone company, Manitowoc Foodservice, Inc. MFS. The spin-off is deemed advantageous for both the companies that are industry leaders and have distinct strengths. Per the terms of the spin-off, Manitowoc shareholders received a share of Manitowoc Foodservice stock for every share of Manitowoc stock held at the close of business on the record date of Feb 22, 2016.
Manitowoc currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the same sector are Astec Industries, Inc. ASTE and Brady Corp. BRC. Both these stocks hold a Zacks Rank #1 (Strong Buy).
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