Manitowoc (MTW) Stock Down 46% YTD: Will It Bounce Back?
The Manitowoc Company’s MTW focus on product innovation, expanding aftermarket business, cost control and efforts to improve productivity are commendable. However, shares of the company have lost 46% year to date compared with the industry’s decline of 2%. This downside can be primarily attributed to the loss incurred in the first two quarters of this year, impact of the COVID-19 pandemic and weak crane market.
Let’s delve deeper.
Factors Hurting the Stock
Manitowoc reported adjusted loss per share of 18 cents in first-quarter 2020, followed by a second-quarter 2020 adjusted loss per share of 47 cents. The company had reported profit in the first two quarters of 2019. Its results have been impacted by a weak crane market, which had so far been bearing the brunt of softening global market demand amid the protracted U.S-China trade war. It has now been further impacted by COVID-19 and the slowing global economy.
The company’s backlog as of second-quarter 2020 end was $431 million, down 17% year over year. Second-quarter orders slumped 36% year over year to $238 million, continuing a trend of relative weakness from fourth-quarter 2019. Customers became more cautious as a result of uncertain market conditions and this will continue to weigh on Manitowoc’s performance.
The pandemic had disrupted the company’s supply chain and weakened demand for products and services. However, Manitowoc has restarted operations in all its facilities during second-quarter 2020. Nevertheless, going forward, government mandates in response to resurgence of COVID-19 cases could result in plant shutdowns or other actions that may impact productivity. This might weigh on the company’s results in the upcoming quarters.
Key Growth Drivers
To counter weak demand amid the coronavirus pandemic, Manitowoc is taking necessary steps to align production with changing levels of demand. The company is also cutting down discretionary spending, while eliminating salary increases across the enterprise, including executives and board members. Furloughs and temporary plant shutdowns are also being planned. based upon order rates.
In order to proactively manage liquidity, Manitowoc has lowered capital spending this year by 50% and also suspended the share buyback program. The company has always remained focused on increasing productivity and eliminating waste. Further, Manitowoc’s total debt-to-total capital ratio was at 0.39 as of Jun 30, 2020, much lower than the industry’s 0.74. Manitowoc’s total debt-to-total capital ratio has gone down considerably over the years — from 0.62 as of 2015 end to the current 0.39.
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. Manitowoc’s aftermarket business continues to perform well. As a percentage of total sales, aftermarket business was 18% during 2019 and 23% in the first half of 2020. Higher-margin parts and services are primarily driving growth. The company remains focused on improving this crucial part of the business.
Thus, operational focus, healthy balance sheet and market leading products position it well to capitalize when end markets recover. We believe that these factors will eventually benefit Manitowoc’s results and help its share price post a turnaround.
Zacks Rank & Key Picks
Manitowoc currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better ranked stocks in the Industrial Products sector include IIVI Incorporated IIVI, Silgan Holdings, Inc. SLGN and SiteOne Landscape Supply, Inc. SITE. While IIVI sports a Zacks Rank #1 (Strong Buy), Silgan and SiteOne carry a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have appreciated 28.4% over the past year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have gained 18.1% in a year’s time.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has surged 61.6% over the past year.
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