Manitowoc Shares Up on Earnings Beat - Analyst Blog

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Shares of Manitowoc Company, Inc. ( MTW ) gained 4% a day after reporting upbeat third-quarter 2013 results on Oct 24. Adjusted earnings from continuing operations catapulted an impressive 129% year over year to 39 cents per share helped by sound performance in the Crane segment, successful introduction of new products, as well as Manitowoc's strategic initiatives. The results beat the Zacks Consensus Estimate of 32 cents.

Operational Update

Total revenue was $1014 million in the reported quarter, up 7% year over year driven by increased Crane segment sales. However, the revenues fell short of the Zacks Consensus Estimate of $1034 million.

Cost of sales increased 6% to $754 million in the second quarter from $713 million in the year-ago quarter. Gross profit improved 11% year over year to $260 million. Consequently, gross margin expanded 90 basis points (bps) to 25.6% in the quarter.

Engineering, selling and administrative expenses slipped 1% year over year to $151 million. Adjusted operating income was $109 million, up 34% year over year, leading to 220 bps expansion in operating margin to 10.8%.

Segmental Performance

Revenues from the Crane and Related Products segment increased 10% year over year to $612 million in the reported quarter, driven by continued growth in the American region due to increased crawler crane activity, as well as strong results from the crane care. The segment's operating income rose 103% year over year to $55.7 million on higher sales volume as well as improved operational efficiency.

Foodservice Equipment segment revenues were $401.9 million in the quarter compared with $392.4 million in the prior-year quarter. The improvement was mainly backed by sales of new products and growth in the Americas and increasing demand in Europe from the successful roll-out of Manitowoc's blended beverage technology. However, the segment's operating income dropped 3% year over year to $69 million. Ongoing investments in key brand manufacturing strategies, as well as new product development costs affected profitability during the quarter.

Backlog

Backlog in the Crane segment stood at $568 million at the end of the third quarter of 2013, down $158 million sequentially. Total orders were $450 million, a 23% decline from the prior-year quarter, reflecting conservative spending actions of customers.

Financial Update

As of Sept 30, 2013, cash and temporary investments amounted to $87.2 million versus $76.1 million as of Dec 31, 2012. Long-term debt was $1.71 billion as of Sep 30, 2013, compared with $1.73 billion as of Dec 31, 2012. Debt-to-capitalization ratio remained high at 72% as of Sep 30, 2013, though it improved from 76% as of Dec 31, 2012.

Cash flow from operating activities improved substantially to $114 million in third quarter from $49.7 million in the prior-year quarter driven by cash from profitability, partially offset by seasonal working capital requirements in both segments. Capital expenditure was $26.4 million in the quarter compared with $15.5 million in the year-ago quarter.

Outlook

For full-year 2013, Manitowoc lowered its revenue guidance for the Crane segment from high single-digit to mid single-digit growth. Foodservice revenues are expected to rise in modest single- digits compared with the mid single-digit growth expected earlier.

The company however reiterated its forecast of high single-digit improvement in operating margins in the Crane segment and mid-teens gains in the Foodservice segment.

Capital expenditure is expected to be $100 million for the year. Manitowoc also reaffirmed the outlook for depreciation and amortization, which will be $115 million for 2013. Interest expenses are expected at $125 million, while debt reduction is targeted to exceed $200 million.

Our View

Crane demand is expected to increase significantly, aided by the new highway bill and a turnaround in the construction sector. The segment will also be benefited by innovation of new products and services. Growing global energy and power generation investment will drive segment growth. The Foodservice segment will be assisted by new manufacturing facilities and new products. Margins for both the Crane and Foodservice segments are expected to improve in fiscal 2013. However, high debt levels will continue to be a headwind.

Wis.-based  Manitowoc is one of the world's leading innovators and manufacturers of commercial foodservice equipment. The company is one of the premier innovators and providers of crawler cranes, tower cranes, and mobile cranes for the heavy construction industry. These are complemented by industry-leading product support services. Manitowoc currently retains a Zacks Rank #4 (Sell).

Peer Performance

Among Manitowoc's peers, Caterpillar Inc. 's ( CAT ) third quarter earnings dropped 43% year over year to $1.45 per share, well short of the Zacks Consensus Estimate of $1.68. Earnings of Astec Industries, Inc. ( ASTE ) also dipped 3.4% to 28 cents per share, short of the Zacks Consensus Estimate of 37 cents.

On the other hand, Terex Corp. ( TEX ) fared much better, delivering a 24% increase in its third-quarter 2013 adjusted earnings to 77 cents per share, outperforming the Zacks Consensus Estimate of 58 cents.



ASTEC INDS INC (ASTE): Free Stock Analysis Report

CATERPILLAR INC (CAT): Free Stock Analysis Report

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 , Earnings , Stocks

Referenced Stocks: ASTE , CAT , MTW , TEX

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