Manitowoc Beats by a Penny - Analyst Blog

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Manitowoc Co. Inc. ( MTW ) has reported an adjusted EPS of 14 cents in the fiscal 2011 fourth quarter, compared with 10 cents in the year-earlier quarter. EPS in the quarter beat the Zacks Consensus Estimate by a penny.

Total revenue during the quarter increased 24.5% year over year to $1034.5 million, driven by sales improvement in both the business segments. Revenue in the quarter was ahead of the Zacks Consensus Estimate of $978 million.

Costs and Margins


Costs of goods sold increased to $825.4 million during the quarter from $637.9 million in the year-earlier quarter. Gross profit upped 8% to $209.1 million from $193 million in the year-ago quarter. However, gross margins plunged 300 basis points year over year to 20.2%.

Engineering, selling and administrative expenses also increased to $143.3 million from $132.1 million in the year-earlier quarter. Adjusted operating income increased to $65.8 million from $60.9 million in the prior-year quarter while operating margins contracted 90 basis points year over year to 6.4%.

Segment Performance

Net sales in the Crane segment were up 40% year over year to $687.6 million. The improvement is mainly due to continued growth in the Americas and strong demand in emerging economies and the Greater Asia-Pacific region.

Segment operating earnings upped 30% to $39.5 million from the year-earlier quarter. Operating margins however dipped 50 basis points year over year to 5.7% due to higher volume leverage being offset by commodity cost, production inefficiencies, and a negative product sales mix.

Total revenue from the Foodservice segment was $346.9 million, up 2% on the year-over-year basis driven by overall growth across all regions and success of new products. Segment operating income was up 13% year over year to $44.6 million. Operating margin expanded 120 basis points to 12.9% driven by higher sales volumes and the benefits from lean initiatives, scale economies and product sales mix.

Backlog

The Crane segment's backlog totaled $761 million as of fiscal 2011 end compared with $572 million as of fiscal 2010 end. The segment also reported total orders of $676 million in the fourth quarter, a 9% increase year over year. This marked Manitowoc's highest level of order activity since the third quarter of 2008.

Fiscal 2011 Performance

Manitowoc reported fiscal adjusted EPS of 38 cents in 2011, more than four times the 9 cents in 2010 and 2 cents above the Zacks Consensus Estimate. Revenues improved 16% year over year to $3.65 billion, ahead of the Zacks Consensus Estimate of $3.58 billion.

Financial Position

As of fiscal 2011 end, cash and cash equivalents totaled $71.3 million, down from $86.4 million as of fiscal 2010 end. Cash from operations was $30.8 million for the year, down substantially from $202.9 million in the prior year. As of December 31 2011, the debt-to-capitalization ratio remained flat at 80% compared with December 31, 2010.

Outlook

Manitowoc estimates Crane revenue to grow in the range of 10% to 15% year over year and Foodservice revenue in a high single-digit percentage range. The Crane segment's operating income is expected to increase in the 30% to 40% band, while operating income at the Foodservice segment is expected to increase 10% to 15%.

Capital expenditure is forecast to be approximately $80 million; depreciation & amortization of approximately $120 million; reduction in interest expense in the range of $25 million to $30 million; and amortization of deferred financing fees of approximately $10 million. Debt reduction is targeted at $150 million to $200 million.

Our Take

Manitowoc holds a strong market position in the Cranes business. After suffering repeated revenue declines ever since the third quarter of 2008, the segment finally did a turnaround in the fourth quarter of 2010.

The momentum has been maintained since then. The segment is witnessing continued strength in several emerging markets, including Asia, Latin America, India, and the Middle East.

We see significant long-term growth potential in this market, driven by an increase in global energy consumption and the need for infrastructure upgrade in both the developed as well as developing nations. Furthermore, the Foodservice segment has significant growth potential from further investments in new product development and innovation besides expanding the global footprint. 

On the flipside, Manitowoc's high debt level remains a cause of concern. Manitowoc's growth strategy has historically relied on acquisitions. The company's current leverage position may restrict it from pursuing potential acquisition until it is able to reduce its debt and leverage to a point where additional debt could be incurred to support the financing. The stock currently retains a Zacks #3 Rank (short-term Hold recommendation).

Manitowoc is a multi-industry, capital goods manufacturer with over 100 manufacturing and service facilities in 26 countries. It is one of the world's largest providers of lifting equipment for the global construction industry.

It is also a leading manufacturer of commercial foodservice equipment serving the ice, beverage, refrigeration, food preparation and cooking needs of restaurants, convenience stores, hotels, health care and institutional applications. Manitowoc competes with Terex Corp. ( TEX ) and privately held Altec Industries Inc. and American Panel Corporation.


 
MANITOWOC INC ( MTW ): Free Stock Analysis Report
 
TEREX CORP ( TEX ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: MTW , TEX

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