Strong 4Q for Manitowoc - Analyst Blog

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Strong 4Q for Manitowoc

Manitowoc Company, Inc. ( MTW ) reported fourth-quarter 2012 adjusted earnings from continuing operations of 27 cents per share, beating the Zacks Consensus Estimate of 24 cents and exceeding the prior-year quarter's earnings of 14 cents per share. The year-over-year increase was attributable to the release of an $11.6 million reserve as a result of a favorable tax audit outcome.

On a reported basis, earnings from continuing operations were $34.5 million or 26 cents per share compared with the prior-year quarter's earnings of $14.9 million or 11 cents per share.

Manitowoc, which is among the prominent players in the construction machinery industry along with Caterpillar Inc ( CAT ) , Deere & Company  ( DE ) and Terex Corp. ( TEX ) , reported adjusted earnings from continuing operation of 78 cents per share for 2012, a significant rise of 110% from the year-ago adjusted earnings of 37 cents. The results beat the Zacks Consensus Estimate of 74 cents. On a reported basis, earnings were 76 cents per share compared with a loss of 8 cents posted in 2011.

Operational Update

Total revenues were $1.1 billion in the reported quarter, up 10% year over year. It was ahead of the Zacks Consensus Estimate of $1.08 billion. The year-over-year rise is mainly due to an increase in Crane and Food Service segment sales.

Revenues for the full year increased 8.5% to $3.9 billion from $3.6 billion in 2011, meeting the Zacks Consensus Estimate.

Cost of sales increased 7.6% to $883.9 million in the fourth quarter from $821.3 million in the year-ago quarter. Gross profit improved 19.3% year over year to $246.5 million. Consequently, gross margin expanded 180 basis points (bps) to 21.8% in the quarter.

Engineering, selling and administrative expenses went up 9.1% year over year to $154.5 million. Operating profit rose 36% to $74.4 million. Operating margin increased 130 bps to 6.6% in the quarter.

Segmental Performance

Revenues in the Crane and related products segment increased 11.6% year over year to $767.2 million in the reported quarter due to strong activity in the American region, as well as higher demand in emerging markets. This rise was partly offset by a negative impact from currency exchange. The segment's operating income rose 45% year over year to $56.3 million in the fourth quarter, primarily due to higher sales volume and operational efficiencies.

Foodservice Equipment segment revenues were $363.2 million in the quarter compared with $340.3 million in the prior-year quarter. The improvement was mainly due to growth across all geographies, continued traction of new products, and engaged channel partners. The segment's operating income rose 12% year over year to $50.3 million in the fourth quarter.

Backlog

Backlog in the Crane segment was $756 million as of Dec 31, 2012, versus $761 million as of Dec 31, 2011. Total orders were $544 million for the fourth quarter, 19% lower than the prior-year quarter.

Financial Update

Cash and temporary investments increased 6.7% year-over-year to $76.1 million at the end of 2012. Long-term debt was $1.73 billion as of Dec 31, 2012, a 4.6% year-over-year decrease. Debt-to-capitalization ratio reduced to 75% as of Dec 31, 2012, from 79% as of Dec 31, 2011.

Cash flow from operating activities was $233.2 million in the quarter versus $197.9 million in the prior-year quarter. Capital expenditure was $22.7 million in the quarter compared with $32.6 million in the year-ago quarter.

Outlook for 2013

For full-year 2013, the company expects crane revenues to grow in a high single-digit clip, while foodservice revenues are expected to grow in a low single-digit clip. The company expects a high single-digit improvement in operating margins in the Crane segment and mid-teens gains in the foodservice segment.

Capital expenditure has been projected to be $100 million for the year. Depreciation and amortization has been predicted to be $115 million for 2013. Interest expenses are expected to be $125 million while debt reduction has been targeted to exceed $200 million.

Our view

The recent divestiture of Jackson Ware Washing business to Hoshizaki USA Holdings, Inc. will strengthen the company's core commercial foodservice business. This will enable Manitowoc to direct resources in a manner to obtain strategic initiatives and drive profitable growth.

Crane demand is expected to soar, benefited by the new highway bill which leads to increased spending in construction activities. Margins in the Foodservice segment are expected to improve significantly in 2013, driven by the introduction of new products.

Manitowoc retains a short-term Zacks Rank #3 (Hold).



CATERPILLAR INC (CAT): Free Stock Analysis Report

DEERE & CO (DE): 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 , Stocks

Referenced Stocks: CAT , DE , MTW , TEX

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