Manitowoc (MTW) Q2 Earnings Beat, Sales Miss Estimates

The Manitowoc Company, Inc. (NYSE:MTW) reported second-quarter 2016 adjusted earnings of 4 cents per share that beat the Zacks Consensus Estimate by a penny. Notably the company has swung to profit from the prior-year quarter loss of 4 cents per share.

Including special items, the company posted a loss of 4 cents per share in the reported quarter. It had posted earnings of 17 cents per share a year ago.

However, shares of the company fell around 16.8% and closed at $4.82 yesterday, after this maker of cranes and restaurant equipment posted a 4.2% year-over-year decline in sales to $457.7 million in the reported quarter. Revenues also missed the Zacks Consensus Estimate of $467.9 million. Sales were affected by a challenging market environment on a number of levels – particularly in Mobile cranes in the Americas – partly offset by strength in Tower cranes.

Operational Update

Cost of sales deteriorated 3.5% to $369.5 million in the quarter from $382.8 million in the year-ago quarter. Gross profit decreased 7.1% year over year to $88.2 million. Also, gross margin contracted 60 basis points (bps) to 19.3%.

Engineering, selling and administrative expenses decreased 7.7% year over year to $73.4 million. Adjusted operating income was $14.8 million compared with $15.4 million in the year-ago quarter.

Backlog

Backlog was $394 million as of Jun 30, 2016 as against $502 million in first-quarter 2016. Second-quarter 2016 orders of $349 million dropped from $417 million in the preceding quarter. This represents a book-to-bill of 0.8.

Restructuring Activities

On Aug 8, 2016, Manitowoc announced its decision to relocate its crawler crane manufacturing operations from Manitowoc, WI to Shady Grove, PA. This action will support the company’s strategy of reducing its manufacturing capacity globally. Manitowoc’s crawler business intends to maintain its product engineering and related support functions in the Wisconsin area.

The company projects cash outflows of approximately $35-50 million in settlement of these expenses by the end of 2017. In addition, the company anticipates recognizing non-cash charges of approximately $105-120 million. In total, this initiative is predicted to generate annualized pre-tax cost savings of $25–30 million.

Financial Updates

Manitowoc ended the quarter with cash and temporary investments of $40.8 million compared with $31.5 million at year-end 2015. Long-term debt was $275 million as of Jun 30, 2016 compared with $1,326.6 million as of Dec 31, 2015. Cash flow used in operations was $16.4 million in second-quarter 2016 as against cash flow of $55.5 million in the prior-year quarter.

2016 Guidance

Manitowoc slashed its full-year 2016 outlook. The company expects revenues to decline approximately 10–12% from the previous guidance of flat revenues. It lowered adjusted operating income margins to approximately 1–2% from the prior view of around 4%. The company reaffirmed its capital expenditures guidance, estimated to be in the range of approximately $45–$50 million for the year.

Zacks Rank

Manitowoc currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the sector include Astec Industries, Inc. (NASDAQ:ASTE) , ACCO Brands Corporation (NYSE:ACCO) and AO Smith Corp. (NYSE:AOS) . All the three stocks hold a Zacks Rank #2 (Buy).