Strong Order Flow To Drive Manitowoc Amid High Input Costs

On Mar 26, we issued an updated research report on The Manitowoc Company, Inc. (NYSE:MTW) . Product innovation and rise in orders will continue to be growth drivers for the company. Also, its focus on cost control and pricing actions will help counter input cost inflation.

Let's analyze the factors in detail.

Solid Order Growth Instils Optimism

Orders totaled $1,910.7 million in 2018, marking a year-over-year increase of 3%. This increase can be attributed to new products and favorable market conditions. In the Americas, demand is being led by commercial construction and energy end markets. The North American oil and gas environment continues to improve with investment in upstream well completions, continuing to drive crane utilization and replacement demand.

Manitowoc’s backlog totaled $670.6 million as of Dec 31, 2018, marking an increase of 11% from backlog of $606.6 million at the end of the prior year. This can primarily be attributed to improved demand in the U.S. markets. Currently, over 75% of the year-end backlog is scheduled to ship in the first half of 2019. This provides improved revenue visibility for the year.

The company’s revenue guidance for 2019 is at $1.85-$1.95 billion. Compared with revenues of $1.85 billion in 2018, the mid-point of the guidance reflects year-over-year growth of 3%. It also provided EBITDA guidance at $125-$145 million for 2019. The mid-point of the guidance projects year-over-year growth of 16%. Manitowoc also expects capital expenditure of $35 million for the current year.

The Zacks Consensus Estimate for revenues for 2019 is pinned at $1.91 billion, projecting year-over-year growth of 3%. The Zacks Consensus Estimate for earnings is pegged at $1.31, projecting impressive growth of 105%.

Pricing Actions, Cost Control to Negate Impact of Tariffs

Incremental input costs will continue to impact margins in the near term primarily due to the imposition of tariffs on steel imports. Further, supply-chain challenges continue to be a headwind. Fluctuating foreign exchange rates are weighing on Manitowoc's margins, particularly on cranes produced in Europe that it sells in the United States.

The company continues to execute the strategy to cover cost inflation through pricing actions. Further, it remains focused on cost controls, reducing headcount, increasing productivity and eliminating waste. It has also been taking aggressive steps to support supply-chain partners to ensure timely delivery of components.

Innovation — A Key Catalyst

Manitowoc’s aftermarket sales in 2018 were up 8%. Growth primarily stemmed from higher-margin parts and services. The company remains focused on improving this crucial part of the business. Further, it noted that there is scope of increasing revenues from the Middle East. It continues to strengthen ties with channel partners in the region to capitalize on the recovery in markets.

The company’s focus on innovation will continue to aid in leading the industry by providing differentiated products that add value to customers. It introduced the tower crane at Bauma, China, called the MCT 565 for the Asia market. Following the positive response, the company is now developing an entire range of tower cranes in China for the Asia market, which will enable it to grow organically in the region. Manitowoc is set to introduce six cranes at the upcoming Bauma Trade Show in Munich, Germany in April.

Share Price Performance

Shares of the company have outperformed the industry it belongs to year to date. The stock has gained around 10% year to date compared with the industry's growth of 4.0%.

Zacks Rank & Stocks to Consider

Manitowoc currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include DMC Global Inc. (NASDAQ:BOOM) , CECO Environmental Corp. (NASDAQ:CECE) and W.W. Grainger, Inc. (NYSE:GWW) . All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DMC Global has a long-term earnings growth rate of 20%. The stock has risen 37% year to date.

CECO has a long-term earnings growth rate of 15%. The company’s shares have gained around 11% so far this year.

Grainger has a long-term earnings growth rate of 12.4%. Its shares have moved up 2% year to date.

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