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Bear of the Day: Manitowoc (MTW)

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The Manitowoc Company, Inc. (MTW - Free Report) finally hit the bottom of the industrial equipment cycle in 2017 but then the steel tariffs hit this Zacks Rank #5 (Strong Sell).

Manitowoc makes cranes and lift solutions in 20 countries. Headquartered in Wisconsin, it provides crawler cranes, tower cranes and mobile cranes for the heavy construction industry.

Over half its 2017 revenue was generated outside the United States.

2017 was the Bottom

On Feb 8, Manitowoc reported its fourth quarter 2017 results and missed on the Zacks Consensus Estimate by 9 cents. Earnings fell $0.15 versus the consensus of a decline of $0.06.

However, the company saw continued improvement in the underlying business. While full year 2017 revenue fell 2% year-over-year, other fundamentals showed improvement by the end of the year.

Fourth quarter orders rose 78% to $620.2 million year-over-year.

The year-end backlog as of Dec 31, 2017 jumped 87% to $606.6 million, up from $328.8 million as of Dec 31, 2016.

Fourth quarter net sales also rebounded, coming in at $481.5 million, up from $378.2 million in the fourth quarter of 2016. The majority of that increase was due to increased demand, especially in the U.S. and European markets.

Everything seemed on track for this company to see a big pick-up in earnings and revenue in 2018.

But then the steel tariffs were announced.

Steel Tariffs Hammer the Stock

The 25% tariff on imported steel sent Manitowoc shares tumbling. The company uses a large amount of steel in its crane manufacturing and Wall Street panicked.

The stock hasn't yet recovered. It's still down 27% year-to-date.

Full Year Estimates Cut

After the company gave guidance for 2018 in February, some analysts lowered their 2018 full year estimates as they were overly bullish.

4 estimates were cut in the last 60 days but 3 were also cut in the last month, which is probably a reflection of the concern about the steel tariffs. Although, one analyst has also raised in the last week.

The 2018 Zacks Consensus fell to $0.44 from $0.57 just 60 days ago.

This is still a huge turnaround from the 2017 lows, where the company lost $0.26. That's 269% year-over-year earnings growth and is the first time in 3 years it would see positive earnings.



Analysts still see strong demand into 2019. They remain bullish. One estimate for 2019 has been raised in the last week.

The company is expected to make $1.38 in 2019. That's a gain of 213%.

Shares Tumble in 2018

Has the 2018 sell off on tariff worries created a buying opportunity?



Even with the sell off in the shares, they are still trading with a forward P/E of 66. The stock had gotten ahead of the fundamentals, as is usually what happens when a cyclical stock hits the bottom.

Shares aren't yet at multi-year lows either, which seems to indicate that the tariff fears could be overblown.

Manitowoc will report earnings again in mid-May, but in the meantime, investors might want to take a look at another industrial equipment manufacturer, Caterpillar (CAT - Free Report) . It's currently trading with a Zacks Rank of #2 (Buy).

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