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Manitowoc Shares Rise on Earnings Beat

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Shares of Manitowoc Company, Inc. (MTW - Free Report) gained around 15% a day after reporting upbeat fourth-quarter 2013 results on Jan 30. Adjusted earnings from continuing operations catapulted 74% year over year to 47 cents per share aided by sound performance in the Foodservice segment, successful introduction of new products, as well as Manitowoc’s cost control initiatives. The bottom line beat the Zacks Consensus Estimate of 33 cents.

Manitowoc reached a new 52-week high of $29.39 on Jan 31, up from its previous high of $26.01.

Including restructuring costs and other items, earnings from continuing operations were 15 cents per share in the quarter compared with 26 cents in the year-ago quarter.

Operational Update

Total revenue was $1104 million in the reported quarter, down 2.1% year over year due to increased Foodservice sales, partially offset by the decline in Crane segment sales. However, revenues fell short of the Zacks Consensus Estimate of $1116 million.

Cost of sales decreased 4% to $842.7 million in the fourth quarter from $879 million in the year-ago quarter. Gross profit improved 5% year over year to $261.6 million. Consequently, gross margin expanded 160 basis points (bps) to 23.7%.

Engineering, selling and administrative expenses slipped 1.1% year over year to $151.9 million. Adjusted operating income was $110.5 million, up 16% year over year, leading to 160-bp expansion in operating margin to 10%.

Segmental Performance

Revenues from the Crane and Related Products segment decreased 7.9% year over year to $704.8 million in the reported quarter due to delayed shipments. The segment’s operating income fell 8.8% year over year to $54.8 million due to lower sales volume, partially offset by improved operational efficiency.

Foodservice Equipment segment revenues were up 10% year over year at $399.5 million in the quarter from $363.2 million in the prior-year quarter. The improvement was mainly backed by continued growth in the Americas and EMEA regions, as well as sales from new product rollouts.

The segment’s operating income also improved 37.7% year over year to $68.7 million. The year-over-year increase was driven by product sales mix and the benefits realized from ongoing investments.


Backlog in the Crane segment was $574 million at the end of the fourth quarter of 2013, down $182 million sequentially. Total orders were $707 million, up 30% from the prior-year quarter, reflecting improved demand in crawler and tower cranes.

Financial Updates

As of Dec 31, 2013, cash and temporary investments amounted to $56.3 million versus $75.9 million as of Dec 31, 2012. Long-term debt was $1.5 billion as of Dec 31, 2013, compared with $1.73 billion as of Dec 31, 2012. Debt-to-capitalization ratio was high at 65.8% as of Dec 31, 2013, though down from 74.8% as of Dec 31, 2012.

Cash flow from operating activities was $270.6 million in the fourth quarter, up from $233.9 million in the prior-year quarter driven by cash from profitability improvement and a reduction in working capital requirements in both segments. Capital expenditure was $38 million compared with $22.7 million in the year-ago quarter.

Fiscal 2013 Performance

For full-year 2013, Manitowoc reported adjusted EPS of $1.45, up around 75% from 83 cents in 2012. The results were ahead of the Zacks Consensus Estimate of $1.25. Including one-time items, EPS was $1.05 compared with 76 cents in the prior year.

Revenues for the year increased 3.4% year over year to $4.05 billion but missed the Zacks Consensus Estimate of $4.07 billion.

2014 Outlook

For 2014, Manitowoc expects modest top-line growth for Crane segment revenues. Foodservice revenues are expected to rise in mid single digits. The company forecasts high single-digit improvement in operating margins in the Crane segment and high-teens gain in the Foodservice segment.

Capital expenditure is expected at $91 million for the year. Manitowoc also predicts depreciation and amortization of $120 million for 2014. Interest expenses are expected at $100 million.

Our View
Manitowoc will be benefited from the execution of new credit agreement and maintaining financial flexibility. The company remains focused on directing resources which include cost reduction and process improvement initiatives, as well as debt repayment.

Manitowoc expects margin expansion and modest growth in Cranes in 2014, driven by product introductions; ongoing demand in key product lines supported by long-term partnership with first-class distribution network, and continued progress in operational and quality initiatives.

Moreover, focus on customers, new technologies and innovation in brands and manufacturing initiatives will drive growth in the Foodservice industry. However, general market uncertainties remain a matter of concern in the near term.

Wisconsin-based Manitowoc is one of the world's leading innovators and manufacturers of commercial foodservice equipment. The company is one of the premier innovators and providers of crawler cranes, tower cranes and mobile cranes for the heavy construction industry. These are complemented by industry-leading product support services.

Manitowoc currently retains a Zacks Rank #3 (Hold). Titan International Inc. (TWI - Free Report) and Terex Corp. (TEX - Free Report) also belong to the same industry. While Titan International carries a Zacks Rank #1 (Strong Buy), Terex holds a Zacks Rank #2 (Buy).

Another peer, Caterpillar Inc. (CAT - Free Report) reported a 5% increase in earnings to $1.54 per share for fourth-quarter 2013 – the only quarter in the fiscal 2013 to report year-over-year growth. Results outperformed the Zacks Consensus Estimate of $1.29.

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