Back to top

Image: Bigstock

Manitowoc Rides on Cost Control Efforts Amid Weak Demand

Read MoreHide Full Article

On May 26, we issued an updated research report on The Manitowoc Company (MTW - Free Report) . The company will benefit from product innovation, solid aftermarket business, continuous focus on cost control and efforts to improve productivity.

Wider-Than-Expected Loss in Q1

Manitowoc reported first-quarter 2020 adjusted loss per share of 18 cents wider than the Zacks Consensus Estimate of a loss of 10 cents per share due the impact of the COVID-19 pandemic. The company had reported earnings per share of 8 cents in the prior-year quarter.

Impact of COVID-19 Remains a Concern

Manitowoc has significant operations worldwide, including in the United States, France, Germany, Portugal, Italy and China. All of these countries have been affected by the coronavirus outbreak. With respective governments taking necessary measures to stem the outbreak, it led to disruptions at some of Manitowoc’s manufacturing facilities. The pandemic has weakened demand for products and services. There is considerable uncertainty at this point regarding the overall impact of the pandemic on Manitowoc’s operations or workforce, or on customers, dealers and suppliers.

Depressed Crane Markets

The crane market had so far been bearing the brunt of softening global market demand amid the protracted U.S-China trade war. It has now been impacted further by COVID-19 and drop in oil prices. Notably, first-quarter orders were down 15% year over year to $375 million, continuing a trend of relative weakness from second-half 2019. Customers became more cautious as a result of uncertain market conditions and this will continue to impact Manitowoc’s performance. Further, depressed oil & gas markets, which generate around 20% of the company’s sales, remains a headwind.

Cost Control Holds the Key

Manitowoc remains focused on sustaining operating margins in the wake of the pandemic.  It is aligning production with changing levels of demand. The company is also substantially cutting down discretionary spending, while eliminating salary increases across the enterprise, including executives and board members. Furloughs and temporary plant shutdowns are also being planned based upon order rates. In order to proactively manage liquidity, Manitowoc has lowered capital spending this year by 50% and also suspended the share buyback program. The company has always remained focused on increasing productivity and eliminating waste.

Solid Balance Sheet & Innovation to Drive Growth

As of Mar 31, 2020, Manitowoc had total liquidity of $382.0 million, up from $112 million as of Mar 31, 2019. The company has no significant debt maturities until 2026. The company completed the recapitalization of debt structure in March 2019, which lowered borrowing costs. Its total debt-to-total capital ratio was at 0.36 as of Mar 31, 2020, much lower than the industry’s 0.72. Moreover, Manitowoc’s total debt-to-total capital ratio has gone down considerably over the years – from 0.62 as of 2015 end to the current 0.36. Its times interest earned ratio has shown improvement over the years and is currently at 3.6. The company is thus well positioned to tide over the turbulent times.

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. Consequently, operational focus, healthy balance sheet and market leading products position it well to capitalize when end markets recover.

Manitowoc’s aftermarket business continues to perform well. As a percentage of total sales, aftermarket business was 18% during 2019 and 24% in first-quarter 2020. Growth is primarily stemming from higher-margin parts and services. The company remains focused on improving this crucial part of the business.

Price Performance

The company’s shares have fallen 36.5% over the past three months, compared with the industry’s decline of 6.3%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Silgan Holdings Inc. (SLGN - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Energous Corporation (WATT - Free Report) . While Silgan sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Energous carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Silgan has a projected earnings growth rate of 11.3% for 2020. The company’s shares have gained 15% in the past three months.

Broadwind Energy has an expected earnings growth rate of 174% for the current year. The stock has gone up 6% over the past three months.

Energous has an estimated earnings growth rate of 17.3% for the ongoing year. The company’s shares have rallied 37% in three months’ time.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.

Click here for the 6 trades >>