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Manitowoc Stays Neutral

Zacks Equity Research

We reiterate our Neutral recommendation on Manitowoc Company, Inc. (MTW). The company’s first-quarter 2012 revenues and earnings missed the Zacks Consensus Estimate.

The company reported adjusted earnings of a penny per share, falling behind the Zacks Consensus Estimate of 9 cents. Total revenue increased 17.5% year over year to $860.1 million, missing the Zacks Consensus Estimate of $866 million.

The company expects crane revenues to grow in the range of 10%-15% year over year, while foodservice revenues are likely to grow at a high single-digit clip.

Manitowoc’s Crane segment expanded its portfolio, in 2011, with the introduction of numerous innovative products, including Grove RT9150, the world’s largest rough terrain crane. Grove RT9150 became a leader in the construction and maintenance applications in the energy and infrastructure end markets.

In addition, the National NBT 55 became the leader in the oilfield service applications, especially natural gas. Another product, the Grove GMK6300L has a strong demand in the heavy construction and crane rental industry.

These products will help Manitowoc retain its market leading position. The company also plans to introduce new products in 2012, thus further augmenting the portfolio.

The company registered a 16% year-over-year increase in backlog to $931 million in the first quarter, marking the highest backlog level since the recession in the Crane segment. Orders also improved 10% year over  year to $675 million. Growth in the Americas along with the emerging markets helped orders to ramp up in the first quarter.

Manitowoc has recently opened a new production facility called the Passo Fundo facility in Brazil, supporting the energy and infrastructure activities in Latin America. The facility started manufacturing rough-terrain cranes in April. With this, Manitowoc became the first global crane manufacturer of rough-terrain cranes in Latin America.

However, Manitowoc is not the sole company to start manufacturing rough-terrain cranes in Brazil. Recently, Terex Corporation (TEX) has also started to build and supply indigenous rough-terrain cranes in Brazil. Terex has plans to expand in the Latin American regions including Brazil by increasing its manufacturing activities.

Manitowoc has also introduced a number of new products in the Foodservice segment. These products included Indigo ice machine and Blend-in-Cup products which won recognition and awards from McDonald’s (MCD) for sustainable performance.

The Foodservice segment is experiencing strong demand in North America as well as in Europe. The company also plans to deploy resources in the emerging markets of China through establishing new stores and introducing new menu. Manitowoc also opened a new test kitchen in India.

Besides Latin America, Manitowoc also faces growing competition from a number of crane manufacturers in the Chinese market. Privately held companies like Zoomlion, Sany and Fushun Excavator also steeped in the cranes market as increase in demand in the home market encouraged the entrance of these manufacturers.

Manitowoc, therefore, must grow its market share in the emerging economies encompassing Latin America and China to maintain its leading position in these regions.

Further, the construction market is recovering slowly and demand for public as well as private sector construction is expected to remain weak for the balance of the year. Therefore, sluggish construction market may weigh on the Crane segment, which may face challenges in getting orders.

Our recommendation on Manitowoc is in line with a short-term Zacks #3 Rank (Hold).

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