Manitowoc (MTW) Rides on Improving Orders Amid Cost Woes
On Mar 10, we issued an updated research report on The Manitowoc Company, Inc. MTW. The company is expected to benefit from improvement in order levels, innovative product pipeline, market leading products, and constant focus on cost control and improving productivity. However, material cost inflation particularly of steel remains a headwind.
Improving Order Levels Instill Optimism
After being severely impacted by the COVID-19 pandemic, Manitowoc has been witnessing improvement in order levels and backlog in the last two quarters of 2020. This has led to a sequential improvement in Manitowoc’s revenues in the last two quarters. The company reported orders of $508.6 million in fourth-quarter 2020, reflecting year-over-year growth of 8% primarily driven by a couple of large crawler orders in the United States.
Backlog as of Dec 31, 2020 totaled $543.2 million, reflecting an increase of 14.3% year over year primarily due to the increased crawler crane orders. Order levels are likely to improve further in 2021 backed by the ongoing economic recovery and stimulus packages enacted by several countries.
Innovation Provides a Competitive Edge
Manitowoc’s 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. The company remains focused on cash preservation and balance sheet management while funding critical programs for future growth. It continues to evaluate acquisition opportunities to accelerate product development programs in its all-terrain product line. Manitowoc plans to scale-up its Chinese tower crane business to spend $15 million to expand its tower crane rental fleet in Europe. Notably, the tower crane market in China is the largest tower crane market in the world. These strategic initiatives will boost growth as the crane industry rebounds.
Manitowoc’s aftermarket business continues to perform well. Growth is primarily stemming from higher-margin parts and services. It remains focused on improving this crucial part of the business. Further, the company noted that there is scope of increasing its revenues from the Middle East. It continues to strengthen partnerships with its channel partners in the region to capitalize on recovery in the markets.
Cost Control & Low Debt Sustaining Performance
Manitowoc has been focused on cutting costs, and taking efforts to increase productivity and eliminate waste amid the COVID-19 pandemic, leading to improvement in margins. The company’s total debt-to-total capital ratio was at 0.33 as of Dec 31, 2020. Notably, its total debt-to-total capital ratio has gone down considerably over the years — from 0.62 as of 2015 end to the current 0.33. It has a current ratio of 1.99.
Few Headwinds Remain
With increase in sale of crawler cranes, the company’s mix is shifting toward lower-margin products. The company also continues to suffer from low-production levels at its German factory, where it manufactures all-terrain cranes. Further, demand for the mobile crane business has been weak for the last five years, which is concerning. Further, material cost inflation particularly of steel, will impede margins in the near term.
Price Performance
Over the past six months, Manitowoc’s shares have gained 110%, compared with the industry’s rally of 43.2%.
Zacks Rank & Stocks to Consider
Manitowoc currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Deere & Company DE, AGCO Corporation AGCO and Avery Dennison Corporation AVY. While Deere flaunts a Zacks Rank #1 (Strong Buy), AGCO Corporation and Avery Dennison carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere & Company has a projected earnings growth rate of 38.8% for fiscal 2021. Over the past year, the company’s shares have appreciated 66% over the past six months.
AGCO Corporation has an estimated earnings growth rate of 42.7% for the ongoing year. The company’s shares have soared a whopping 664% in the past six months.
Avery Dennison has an expected earnings growth rate of 13.7% for 2021. Over the past month, the stock has climbed 48%.
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