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Bear of the Day: Columbus McKinnon Corporation (CMCO)

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Columbus McKinnon Corporation (CMCO - Free Report) fell short of our quarterly estimates last quarter and its CEO will step down after less than three years in the top spot. On top of that, Columbus McKinnon faces a near-term downturn in the broader manufacturing and industrial sectors.

What’s Going On?

Columbus McKinnon is a leading manufacturer of motion control products, technologies, systems, and services that help industrial-focused firms of all shapes and sizes “efficiently and ergonomically move, lift, position, and secure materials.” Its portfolio includes everything from light rail workstations to hoists.

The Buffalo, New York-based firm is currently divesting some of its less profitable businesses. The company has also closed some of its facilities as part of its “80/20 Process,” which aims to simplify its business, reduce its operating footprint, and more.

This has helped Columbus McKinnon improve its gross margin and management is confident in its longer-term outlook. However, the company fell short our Q2 fiscal 2020 estimates in early November and it has been negatively impacted recently by “industrial market headwinds, higher medical costs, tariffs,” and more.

Then, on December 11, the company announced that chief executive Mark Morelli would step down from his role, effective January 10, 2020, to take over as CEO of Fortive's NewCo. The news took Wall Street by surprise because its stock tumbled roughly 11% in one day. CMCO’s chairman Richard H. Fleming will step in as interim CEO until the company finds a replacement.

 

 

 

 

Outlook

Columbus McKinnon’s Q3 fiscal 2020 revenue is projected to slip 7.5% from the year-ago period to reach $201.06 million, based on our current Zacks estimates. Looking further ahead, the firm’s full-year sales are expected to fall 5.8% in 2020 and another 0.35% in 2021.

The company’s bottom line is also expected to dip in the third and fourth quarters of fiscal 2020, to the tune of -3.3% and -2.9%, respectively. Plus, the charts above and below show investors that Columbus McKinnon’s earnings outlook has trended in the wrong direction.

 

 

 

 

Bottom Line

Columbus McKinnon’s negative earnings revision activity helps it hold a Zacks Rank #5 (Strong Sell) right now. The firm is also part of an industry that rests in the bottom 10% of our more than 250 Zacks industries.

Plus, a transition at the top is never easy, but one that comes amid a business overhaul and a near-term uncertain economic picture for the manufacturing space is even harder. Despite all of this, CMCO stock is up 32% in 2019 and 14% in the last three months and currently hovers right near its 52-week highs.

CMCO stock could be one to avoid for now based on its short-term uncertainty. With that said, some investors might want to leave Columbus McKinnon on their watch list given some of its fundamentals.

Those still interested in the broader Manufacturing - Material Handling industry might want to consider #2 (Buy)-ranked DISCO CORP (DSCSY - Free Report) .

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