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Manitowoc Bets on Cost Control & Innovation Amid Weak Demand

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Zacks Equity Research
·4 min read
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On Mar 16, we issued an updated research report on The Manitowoc Company, Inc. MTW. The company is expected to benefit from product innovation, solid aftermarket business, persistent focus on cost control, improving productivity and pricing actions. However, weak customer spending remains a concern.

Weak Order Levels to Impact 2020 Results

Manitowoc’s backlog as of 2019-end was $485 million, down 29% year over year. Orders in 2019 were $1,638.6 million, which declined 13% year over year. Customers have become more cautious as a result of uncertain market conditions. Trade disputes and other macro-economic factors continue to create uncertainty in global markets. Additionally, the U.S. and European construction markets are slowing and U.S. rate counts have declined. All these factors have negatively impacted customer sentiment. Plant shutdowns and waning demand on account of the coronavirus outbreak have added to woes. Further, supply chain challenges remain a headwind.

Further, fluctuating foreign exchange rates are putting pressure on Manitowoc’s margins, particularly on European-produced cranes that it sells in the United States. The Middle East market also remains challenging owing to geopolitical uncertainties and market competitions.
Manitowoc’s revenue guidance for 2020 is at $1.6-$1.7 billion. The mid-point of the guidance range indicates year-over-year decline of 10%. EBITDA guidance for 2020 is at $85-$115 million compared with $157 million in 2019. Incremental input costs will continue to impact margins in 2020, primarily due to the imposition of the tariffs on steel imports.

The Zacks Consensus Estimate for revenues for fiscal 2020 is at $1.65 billion, indicating a year-over-year decline of 10%. The estimate for earnings per share for the year is 67 cents, a suggested decrease of 65% from the prior-year quarter.

Cost Control Holds the Key

Manitowoc remains focused on cost controls, reducing headcount, increasing productivity and eliminating waste. It is also taking aggressive steps to support supply chain partners to ensure timely delivery of components, combined with alternative sourcing strategies. Manitowoc has also provided own in-house labor to weld the finished components to keep production lines flowing. This will support its financial goals.

Innovations Provides a Competitive Edge

In 2019, the company introduced 10 new models and showcased six new cranes this year. Innovation pipeline remains robust. Focus on innovation will continue to aid it in leading the industry by providing differentiated products that add value to customers.

Growing Aftermarket Business

Manitowoc’s aftermarket business continues to perform well. As a percentage of total sales, aftermarket business was over 18% during fourth-quarter 2019. Growth is primarily stemming from higher-margin parts and services. The company remains focused on improving this crucial part of the business. Further, the company noted that there is scope of increasing revenues from the Middle East. It continues to strengthen partnerships with its channel partners in the region to capitalize on the market recovery.

Share Price Performance

Manitowoc along with Caterpillar, Inc. CAT falls under the Manufacturing - Construction and Mining industry. Manitowoc’s shares have fallen 43.9% over the past year compared with the industry’s decline of 31.8%.


Zacks Rank & Stocks to Consider

Manitowoc currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Sharps Compliance Corp SMED and Tetra Tech, Inc. TTEK. While Sharps Compliance Corp sports a Zacks Rank #1 (Strong Buy), Tetra Tech carries a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Sharps Compliance has an estimated earnings growth rate of 767% for 2020. In a year’s time, the company’s shares have gained 34%.

Tetra Tech has an expected earnings growth rate of 10.7% for the ongoing year. In the past year, the company’s shares have appreciated 38%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Tetra Tech, Inc. (TTEK) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
The Manitowoc Company, Inc. (MTW) : Free Stock Analysis Report
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