Manitowoc (MTW) Poised to Benefit from Growth Initiatives - Analyst Blog

On March 16, 2015, we issued an updated research report on The Manitowoc Company, Inc.MTW , a manufacturer and seller of cranes and related products as well as foodservice equipment worldwide.

The company has revealed its plan to pursue the separation of its Crane and Foodservice businesses into two independent, publicly-traded entities. This move is deemed advantageous for Manitowoc as it will create two industry leaders with distinct strengths. The tax-free spin-off of the Foodservice business, which is expected to be completed by the first quarter of 2016, will allow Manitowoc to pursue its growth strategy as market conditions improve.

Manitowoc's fourth-quarter earnings per share of 27 cents dipped 43% year over year as demand for its products, particularly cranes, was affected by macroeconomic headwinds. Even though sales of the Crane segment in 2015 are anticipated to dip in the mid-single digits year over year, operating margin is projected to be in the high-single-digit range.

Sales in the North American region will grow by low-single digits on the back of new products while improved tower crane markets will drive growth in low-single digits in the Central and Eastern Europe and Asia Pacific regions. Demand is also expected to grow by low-single digits for Manitowoc's industry-leading product support services. Moreover, the company continues to focus on improvement and cost reduction initiatives.

In the Foodservice Equipment segment, Manitowoc launched numerous new products supporting its customers' menu initiatives, energy savings goals and sustainability initiatives. A number of leading indicators suggest that 2015 will bring opportunities of approximately 4% growth for the foodservice sector in the U.S. and Canada.

The company sees growth opportunities in the Europe, Middle East and Africa (EMEA) region and considers itself well positioned to take advantage of the growth opportunities in the APAC region with global and regional product introductions, improvement in operational excellence, and other strategic initiatives. In 2015, Manitowoc's priorities are to continue growing its Foodservice segment, as along with investing in manufacturing processes improvements and lean initiatives to drive margin improvement.

In 2015, one area of concern is the potential negative impact of slump in crude oil prices on the crane market. Strengthening of the U.S. Dollar against other global currencies is also a headwind. Moreover, risks surround the proposed spin-off of the Foodservice business. Manitowoc's debt-to-capitalization ratio remained high at 65% as of fiscal 2014 end.

Manitowoc's estimates have undergone negative revisions following the announcement of its fourth-quarter results. The Zacks Consensus Estimate for fiscal 2015 has gone down 8% to $1.33 and for fiscal 2016 the same has dipped 7% to $1.52.

Stocks to Consider

Manitowoc currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Quanex Building Products Corporation NX , Astec Industries, Inc. ASTE and Briggs & Stratton Corporation BGG . Quanex Building sports a Zacks Rank #1 (Strong Buy), while Astec Industries and Briggs & Stratton carry a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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