Reasons to Hold Manitowoc (MTW) Stock in Your Portfolio
The Manitowoc Company MTW is well-poised to deliver improved results backed by rising demand as well as its efforts to bring innovative products to the market. Its pricing and cost-saving actions will also help negate the impacts of higher costs and supply-chain headwinds on its margins.
Manitowoc is now placing greater emphasis on growing non-new machine sales (aftermarket parts, services, rentals, used cranes, and digital solutions), which will drive sustainable growth in both sales and earnings. Increased spending on infrastructure in the United States is also expected to be a major catalyst going forward.
MTW currently carries a Zacks Rank #3 (Hold).
Shares of the company have soared 67.1% in a year compared with the industry’s 11.1% increase. The Zacks Industrial Products sector has grown 5.6% and the S&P 500 Composite has risen 16.1% in the same time frame.
Image Source: Zacks Investment Research
Solid Growth in Orders to Drive Revenues
Manitowoc reported adjusted earnings per share (EPS) of 22 cents in third-quarter 2023, beating the Zacks Consensus Estimate of a loss of 1 cent per share. Compared with EPS of 10 cents in the third quarter of 2022, earnings in the quarter under review marked a substantial improvement of 120%. MTW has an impressive trailing four-quarter earnings surprise of 885%, on average.
The company’s orders in the third quarter of 2023 were $531.2 million, a 12.5% increase from the year-ago quarter. The backlog was $1,028 million as of Sep 30, 2023, up 9% from the year-ago quarter’s backlog. Backed by the solid performance in the first three quarters of the year, Manitowoc expects revenues to be $2.175-$2.225 billion for 2023, up from the previously stated $2.1-$2.2 billion. Adjusted EBITDA is anticipated to be between $160 million and $180 million, up from the $150-$180 million mentioned earlier. The midpoint of the guidance indicates year-over-year growth of 19%.
Our model’s projection for the company’s 2023 revenues is $2.2 billion, which suggests year-over-year growth of 8%. The projected EPS is $1.60, indicating 51% year-over-year growth.
Demand To Remain Strong
In North America, demand from residential and non-residential construction is driving demand for Manitowoc’s equipment. Due to the U.S. Infrastructure Investment and Jobs Act, the rising investment in roads, bridges, airports and waterways represents a massive opportunity. The company expects demand in the Middle East to be robust in the upcoming quarters. Qatar and Kuwait are also showing signs of growth. This bodes well for Manitowoc. Further, the need to replace the aging crane fleet will support the demand for the company’s equipment.
Aftermarket Sales, Innovation to Aid Growth
To achieve sustainable growth in both sales and earnings, Manitowoc is now placing greater emphasis on growing non-new machine sales (aftermarket parts, services, rentals, used cranes, and digital solutions). Growing this part of the business will provide it with more annuity-like revenue streams, which will help lessen the impact of the crane market cyclicality. This business also carries higher margin rates than new crane sales.
MTW continues to evaluate acquisition opportunities to accelerate product development programs in its all-terrain product line. Manitowoc’s innovation pipeline remains robust. Focus on innovation will continue to aid it in leading the industry by providing differentiated products of value to its customers.
Pricing Actions to Counter Costs
The company is facing higher steel, logistics and transportation costs (both ocean and land freight), which are expected to continue. Manitowoc’s pricing actions and efforts to cut down costs will help negate the impact of inflated costs on its margins.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Brady BRC, Applied Industrial Technologies AIT and A. O. Smith Corporation AOS.
BRC currently sports a Zacks Rank #1 (Strong Buy) and AIT and AOS each carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Brady’s 2023 EPS is pegged at $4.00. The consensus estimate for 2023 earnings has moved 13% north in the past 60 days and suggests year-over-year growth of 9.9%. The company has a trailing four-quarter average earnings surprise of 7.2%. Shares of BRC have rallied 16.4% in a year.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 4% in the past 60 days. The company’s shares have gained 27.2% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 29.4% in a year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Manitowoc Company, Inc. (MTW) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
Brady Corporation (BRC) : Free Stock Analysis Report
