Machinery-construction and mining stocks,
Manitowoc Company, Inc.
Joy Global, Inc.
) surged on Wednesday thanks to China's January trade data, which
showed acceleration despite expectations to the contrary. This
has eased fears of a slowdown in the world's second-largest
economy. The market also found support in the optimistic economic
outlook from the new Federal Reserve Chair Janet Yellen.
In January, imports to the country rose 10% year over year and
exports rose 10.6%. China imported record levels of crude oil,
iron ore and copper to start off the year. China is the largest
consumer of iron ore, and iron imports rose 18%, a record 86.84
million metric tons over December. It surpassed the previous
record set in November by 11.6% and was up 32% year over
Despite weak demand and prices for steel, China's ore
stockpiles also rose to near record highs. The rise in imports
has defied all expectation of a fall given the growing
uncertainty about demand in the country's steel sector.
China's January trade numbers have turned the tables on the
analysts, coming as it is after not-so-inspiring other data,
including purchasing-managers indexes, which had pointed towards
a lull in the manufacturing sector. The market had thus prepared
itself for further signs of weakness in China.
Furthermore, the country's biggest annual holiday, the Lunar
New Year festival was expected to be a drag on January's trade as
factories and offices close shop for long periods before and
after the festivities. The positive data is thus mind baffling
and has ignited speculation regarding its authenticity. The
figures may suspiciously be inflated by fake trade transactions.
Even so, let us have a close look at some of the gainers in the
sector which had otherwise been affected by low demand in
construction and mining, particularly in China.
Manitowoc shares attained a peak of $29.11 yesterday during
intraday trade, close to its 52-week high of $29.29 attained on
Jan 31, before settling down at $27.81 at the end of day, gaining
Manitowoc's upbeat fourth quarter earnings release on Jan 30
worked like a magic wand for its share price, catapulting it to a
52-week high on Jan 3, levels not seen in so many years.
Manitowoc's fourth-quarter earnings per share increased 74% to 47
cents, helped by sound performance at the Foodservice segment,
successful introduction of new products as well as the company's
cost control exercises. The bottom line beat the Zacks Consensus
Estimate of 33 cents.
For 2014, Manitowoc expects modest top-line growth and high
single-digit improvement in operating margins at the Crane
segment. Crane utilization and rental rates continue to improve
with rising demand. Going forward, demand from the wind sector as
well as from oil and gas markets is expected to grow.
Manitowoc is upbeat about its new product launches at ConExpo,
the premier construction-equipment trade show that is slated to
be held in Mar 2014. This could be a catalyst for the Crane
segment. A turnaround in the construction sector will also boost
Foodservice revenues are expected to rise in mid single digits
leading to high-teens gain in Foodservice margins. The segment
will benefit from new manufacturing facilities, restructuring
initiatives and new products.
The Manitowoc Company, Inc. provides crawler cranes, tower
cranes, and mobile cranes for the heavy construction industry and
also manufactures commercial foodservice equipment.
Manitowoc currently sports a Zacks Rank #1 (Strong Buy).
Terex shares gained 3.44% yesterday to close at $43.88 after
hitting a 52-week high of $44.25. Terex shares have gained ever
since it reported impressive third quarter numbers on Oct 30 and
subsequently found support on its decision to sell its truck
business and initiate the dividend.
Terex is expected to report fourth quarter earnings results on
Feb 18. The Zacks Consensus Estimate for the fourth quarter
currently stands at 49 cents, reflecting year-over-year growth of
160%. The consensus for 2013 is at $2.14, up an estimated 17%.
In the third quarter, Terex reported adjusted earnings of 77
cents per share, a 24% improvement year over year, mainly due to
reduced interest expense and a lower effective tax rate. The
results also surpassed the Zacks Consensus Estimate of 58 cents.
Terex ended the quarter with a backlog of $1.8 billion, a 7%
Terex is expected to gain from replacement demand in the Aerial
Work Platforms segment, improvement in its Port business and
restructuring in the Materials Handling & Port Solutions
segment. Terex has decided to sell its truck business to
transition into a lifting and material handling solutions
This divestiture will enable it to focus on cranes, aerial
lifts and telehandlers. It sits well with the company's strategy
of streamlining its construction business by selling certain
underperforming product lines. The initiation of the quarterly
dividend of 5 cents per share and share repurchases will also
improve investor sentiment.
Terex is a global equipment manufacturer catering to the
construction, infrastructure, and surface mining industries.
Terex currently retains a Zacks Rank #2 (Buy).
Caterpillar shares gained 1.27% to close at $96.17 yesterday,
near its 52-week high of $96.68 attained on Feb 14 last year.
So far it has been a good year for the mining and equipment
behemoth starting with its fourth quarter earnings beat which
translated into a 6% jump in its share price on Jan 27. The share
price further found support as news of renewed investments in
Northern Ireland and share repurchases came in. It has almost
been a year since the company hit the $90+ mark. Caterpillar came
across a rough patch for most of last year with struggling growth
Despite reporting a 10% decline in its fourth quarter sales to
$14.4 billion, Caterpillar delivered a 48% rise in its earnings
to $1.54 per share, marking the first year-over-year earnings
improvement in 2013. In spite of challenging macroeconomic
conditions and reduced demand for its mining equipment, cost
reduction was the key to Caterpillar's success in Q4. Despite a
tumultuous year, Caterpillar continued to deliver strong cash
flow and reward shareholders though dividend hikes and share
Caterpillar expects revenues in 2014 to be flat with 2013 levels,
up or down 5%. Excluding restructuring costs, earnings per share
are expected at $5.85. Construction Industries and Power Systems
are expected to deliver sales growth on the heels of better
economic growth. However, sales in Resource Industries will
continue to be challenging, as mining companies keep cutting
their pockets with lower capital expenditures for 2014.
The company might finally be seeing light at the end a dark
tunnel. It is all set to reap the benefits of its cost reduction
activities, namely, shifting production between certain
facilities, rationalization of its smaller facilities and
workforce reductions. Also, improving economic conditions,
especially in China, and recovery in the construction sector
could be catalysts for Caterpillar.
Peoria, IL-based Caterpillar Inc. is the manufacturer of
construction and mining equipment, diesel and natural gas
engines, and industrial gas turbines. The company is one of the
few leading U.S. companies in an industry that competes globally
from a principally domestic manufacturing base.
Caterpillar currently retains a Zacks Rank #3 (Hold).
Shares of Joy Global rose 1.15% to close at $56.21 yesterday.
On Dec 11, 2013, Joy Global reported adjusted earnings of $1.11
per share in the fourth quarter of fiscal 2013, compared with
$2.10 per share in the year-ago quarter. Earnings came in line
with the Zacks Consensus Estimate. The lackluster results at Joy
Global contrast poorly with its peers discussed above.
Fiscal 2013 has been a difficult year for Joy Global. Depleting
backlogs and declining orders from some of the key markets pulled
back results. Of late, Joy Global's management has implemented
several strategies to optimize its cost structure and realign
production capacity to cope with sluggish customer orders. The
company is pushing its overall inventory and working capital
Moreover, Joy Global is positioned to relocate production
capacity to low-cost regions like China, Poland and South Africa.
Joy Global is also trying to cut operational expenses through
restructuring, reducing head count and closing some low-margin
facilities. All these initiatives are expected to generate
savings of $75 million in fiscal 2014.
Joy Global Inc., headquartered in Milwaukee, WI, manufactures
surface and underground mining equipment for extraction of coal,
copper, iron ore, oil sands, gold and other mineral
Joy Global currently holds a Zacks Rank #3 (Hold).
CATERPILLAR INC (CAT): Free Stock Analysis
JOY GLOBAL INC (JOY): Free Stock Analysis
MANITOWOC INC (MTW): Free Stock Analysis
TEREX CORP (TEX): Free Stock Analysis Report
To read this article on Zacks.com click here.