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Manitowoc (MTW) Hit by Low Crane Demand: Time to Dump?

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On Nov 23, 2016, we issued an updated research report on The Manitowoc Company, Inc. (MTW - Free Report) , a leading global manufacturer of cranes and lift solutions. The current global economic environment is severely affecting Manitowoc’s customer demand for cranes.

Manitowoc reported adjusted loss per share of 28 cents per share in third-quarter 2016, wider than the Zacks Consensus Estimate of a loss of 26 cents and the year-ago quarter’s loss of 26 cents. The mobile crane market continued its downward trend in the quarter with weak global oil and gas market, along with lower used equipment prices, continuing to impact demand severely.

Backlog at the third-quarter end was $353.6 million, a sequential decrease of 10% and a 44% plunge year over year. For the third quarter, orders totaled $310 million compared with $349 million in second-quarter 2016 and $338 million in third-quarter 2015. Manitowoc has significantly reduced its production build schedules for Mobile products to reflect these lower incoming order rates and align its build schedule as well as inventory levels.

Further, the company is accelerating the relocation of the Manitowoc crawler production to Shady Grove, taking additional headcount reductions, reducing other non-employee costs and temporarily shutting down certain mobile production lines during the fourth quarter. These efforts will negatively affect gross profits for the balance of the year.

For the fourth quarter, Manitowoc anticipates revenues to decline approximately 25–30% year over year in fourth-quarter 2016. Adjusted operating loss margin is anticipated to lie between 4% and 6%. The fourth-quarter outlook reflects the impact from the weak mobile crane market and the negative impact on planned absorption from the reduced build schedules.

Overall crane business is likely to be very weak and at historical low levels. Based on current activity levels, particularly in mobile cranes, the company does not expect a meaningful recovery in global demand for cranes in the near term. Uncertainty among customers is mounting due to emerging market peers, apprehensions related to China’s growth outlook, persistently depressed oil prices and sluggish domestic growth. The company is witnessing particularly soft demand for mobile cranes, primarily due to repressed market performance, especially in the U.S. and the Middle East due to a a weak oil and gas sector. Headwinds from oil & gas markets, which account for approximately 20% of crane sales, will persist in the rest of the quarters of 2016 as well.

Manitowoc currently has a Zacks Rank #5 (Strong Sell). The estimates for the company for the fourth quarter and fiscal 2016 has moved south in the past 30 days, reflecting this headwinds. The Zacks Consensus Estimate for fourth-quarter 2016 is at a loss of 15 cents per share and for the full-year is at a loss of 40 cents per share.  

Stocks to Consider

Some better-ranked stocks in the same sector include ACCO Brands Corporation (ACCO - Free Report) , EnerSys (ENS - Free Report) and John Bean Technologies Corporation (JBT - Free Report) . ACCO Brands Corporation witnessed a 4% increase in earnings estimates in the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EnerSys also sports a Zacks Rank #1 and its earnings estimates have also gone up 4% in the last 30 days. John Bean Technologies, another Zacks Rank #1 stock, has seen earnings estimates move north by 2%.

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