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Manitowoc (MTW) Up 50% in 3 Months: What's Driving the Rally?

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Shares of The Manitowoc Company, Inc. (MTW - Free Report) have gained 50% over the past three months. The leading provider of engineered lifting solutions has also outperformed the industry’s and the S&P 500’s rally of 26.4% and 6.1%, respectively, during the same time frame.  The company has been benefiting from improvement in order levels and backlog lately. Better-than-expected fourth-quarter results, anticipated benefits from its continuous focus on cutting costs and efforts to increase productivity also contributed to its share-price appreciation. Manitowoc’s market-leading products and innovation pipeline also provide it with a competitive edge.

The company has a market capitalization of $701 million. The company has a trailing four-quarter earnings surprise of 39.95%, on average. The Zacks Consensus Estimate for 2021 earnings is currently pegged at 28 cents, indicating a turnaround from the loss of 35 cents suffered in 2020. The estimate for the next year’s earnings is $1.07, suggesting a whopping 281% year-over-year growth.

 

Driving Factors

Q1 Earnings Beat: Manitowoc reported fourth-quarter 2020 adjusted earnings per share of 19 cents, which beat the Zacks Consensus Estimate of 10 cents.

Improving Trends in Order Levels Bode Well: After being adversely impacted by the COVID-19 pandemic in the first half of 2020, Manitowoc witnessed improvement in order levels and backlog in the last two quarters of the year. This led to a sequential improvement in the company’s revenues in the last two quarters. Orders were around $509 million in fourth-quarter 2020, reflecting 8% year-over-year growth primarily driven by a couple of large crawler orders in the United States. Backlog as of Dec 31, 2020, totaled $543.2 million, marking an increase of 14.3% year over year primarily on the increased crawler crane orders and the timing of shipments in the December-end quarter. Order levels are likely to improve in 2021 backed by the ongoing economic recovery and stimulus packages enacted by many countries.

Cost & Debt Reduction to Aid Results: Manitowoc has been focusing on cutting costs, and taking efforts to increase productivity and eliminate waste amid the pandemic, leading to improvement in margins. The company’s total debt-to-total capital ratio was at 0.33 as of Dec 31, 2020. Notably, its total debt-to-total capital ratio has gone down considerably over the years — from 0.62 as of 2015 end to the current 0.33. It has a current ratio of 1.99.

Innovation Provides a Competitive Edge: Manitowoc’s innovation pipeline remains robust. Focus on innovation will continue to aid it in leading the industry by providing differentiated products that add value to customers. The company is focused on cash preservation and balance-sheet management while funding critical programs for growth. It continues to evaluate acquisition opportunities to accelerate product development programs in its all-terrain product line. Manitowoc plans to scale-up its Chinese tower crane business to spend $15 million to expand the company’s tower crane rental fleet in Europe. Notably, the tower crane market in China is the largest tower crane market in the world. These strategic initiatives will boost growth as the crane industry rebounds.

Manitowoc’s aftermarket business continues to perform well. Growth is primarily stemming from higher-margin parts and services. It is focused on improving this crucial part of the business. Further, the company noted that there is scope of increasing its revenues from the Middle East. Management continues to strengthen partnerships with its channel partners in the region to capitalize on recovery in the markets.

Zacks Rank & Stocks to Consider

Manitowoc currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Deere & Company (DE - Free Report) , AGCO Corporation (AGCO - Free Report) and Avery Dennison Corporation (AVY - Free Report) . All of these stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deere & Company has a projected earnings growth rate of 82.5% for fiscal 2021. The company’s shares have appreciated 37% over the past three months.

AGCO Corporation has an estimated earnings growth rate of 30% for the ongoing year. The company’s shares have rallied 30% in the past three months.

Avery Dennison has an expected earnings growth rate of 12% for 2021. Over the past month, the stock has gained 18%.

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