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Manitowoc Downgraded to Sell on Lingering Weak Crane Demand (Revised)

Zacks Equity Research

On Jul 12, The Manitowoc Company, Inc. MTW was downgraded a notch to a Zacks Rank #4 (Sell). Going by the Zacks model, companies carrying a Zacks Rank #4 have chances of performing weaker than the broader market over the upcoming quarters.

Why the Downgrade?

On May 9, the manufacturer of cranes reported an adjusted loss per share of 17 cents per share compared with a loss of 5 cents reported in the year-ago quarter. Manitowoc expects revenues to decline approximately 8–10% year over year in 2017. Adjusted EBITDA is anticipated between $41 million and $59 million.

Since first-quarter results, Manitowoc’s shares dipped 6.9%, underperforming the 8.3% growth registered by the Zacks categorized Machinery-Construction/ Mining sub industry.

Crane demand continues to be soft and at historically low levels in America, due to depressed used-crane values and weak rental rates. Based on current activity levels, particularly in mobile cranes, the company does not expect a meaningful recovery in global demand for cranes in the near term. Mobile crane demand continues to be muted in the Americas and the Middle East region, due to persistently lower used crane values and soft rental rates. The North American market for crawler cranes continues to be extremely weak. Uncertainty among customers is mounting due to emerging market peers, apprehensions related to China’s growth outlook, persistently depressed oil prices and sluggish domestic growth.

Manitowoc Company, Inc. Price and Consensus

Manitowoc Company, Inc. Price and Consensus | Manitowoc Company, Inc. Quote

The company is also facing stiff competition from China-based crane manufacturers like XCMG, Zoomlion, Sany, Fushun Excavator and Fushun Yongmao, all of which have demonstrated significant growth in the last few years. They have undergone product-line expansion, primarily adding larger cranes, and captured growing shares of the export markets in Asia, Africa, Middle East and South America.

Manitowoc is overvalued compared with its sub industry. Its forward 12-month Enterprise Value/ EBITDA (EV/EBITDA) ratio is 15.57 while the Zacks categorized Machinery-Construction/Mining sub industry’s 12-month forward EV/EBITDA ratio is much lower at 12.18. Thus, we caution the investors against entering the stock at this point.

Key Picks

Better-ranked stocks in the same industry include Apogee Enterprises, Inc. APOG, Deere & Company DE and Lakeland Industries, Inc. LAKE. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apogee has an average positive earnings surprise of 3.41% in the trailing four quarters. Deere generated an average positive earnings surprise of 70.41% in the last four quarters. Lakeland has an average positive earnings surprise of 49.26%.

(We are reissuing this article to correct a mistake. The original article, issued on Jul 12, 2017, should no longer be relied upon.)