Is The Manitowoc Company A ‘No-Brainer’ for Value Investors?

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Written By Dean McHugh

The Manitowoc Company is a prominent provider of cranes and boom trucks used in various applications, including construction, maintenance, deconstruction, salvage, and more.

The company markets its cranes under well-known brands such as Manitowoc, Potain, National Crane, Grove, and Shuttlelift, making it one of the largest crane providers globally.

Despite a significant decline in the stock price, approximately 35% from its February highs, Manitowoc remains an interesting investment opportunity due to its solid earnings outlook and substantial backlog.

Company Overview and Recent Performance

Credits: DepositPhotos

Manitowoc’s products are widely used across different industries, cementing its position as a key player in the crane market. The stock, which traded above $17 in February, has since fallen to around $11.

This drop has pushed the stock well below its 50-day moving average of $12.46 and its 200-day moving average of $14.16. The decline seems to be more reflective of broader economic concerns rather than company-specific issues.

Earnings Estimates and Balance Sheet

Analysts project Manitowoc to earn $1.18 per share in 2024, with an increase to $1.39 per share in 2025 and $1.52 per share in 2026. This represents a solid growth rate, with the stock currently trading at about 9x estimated 2024 earnings and only 7x the 2026 estimates, highlighting significant value compared to the market’s higher average multiples.

Manitowoc’s next earnings report is expected on August 6, 2024, with consensus estimates predicting a profit of $0.56 per share on revenues of approximately $610 million. However, the company has a substantial debt load of nearly $462 million against around $31.5 million in cash.

Despite the high leverage, the company’s ability to manage its debt and insider ownership provides a level of confidence in its financial stability.

Catalysts for Potential Upside

  1. Insider Buying and Ownership: Recent insider purchases by CEO Aaron Ravenscroft and CFO Brian Regan are encouraging. Although the amounts are not large, consistent insider buying suggests confidence in the company’s future. The significant stake held by these insiders also aligns their interests with those of shareholders.
  2. Positive Earnings Call Insights: During the Q1 2024 earnings call, management highlighted a robust backlog of about $971 million, equivalent to nearly half a year’s worth of revenues. This strong backlog, coupled with promising demand from various sectors like data centers, chip manufacturing, and infrastructure projects, suggests a positive medium to long-term outlook.
  3. Rate Cuts and Economic Activity: Recent rate cuts by the European Central Bank and potential future cuts by the Federal Reserve could stimulate new construction and industrial development, benefiting Manitowoc. Lower interest rates generally spur economic activity, which would increase demand for the company’s products.
  4. Infrastructure Rebuilding: The need for rebuilding infrastructure in the U.S. and other parts of the world presents a significant growth driver for Manitowoc. Many critical infrastructure projects require cranes, creating ongoing demand for Manitowoc’s products.

Risks and Potential Downsides

  1. Challenging European Market: The CEO noted that the tower crane market in Europe remains very challenging. However, there are signs of stabilization expected in 2024, which could mitigate some of these concerns.
  2. Macro Concerns and Recession Risks: Broader economic downturns or recessions pose a significant risk. As an economically sensitive stock, Manitowoc could experience further declines if economic conditions worsen. The company’s high debt load also adds to the financial risk during economic slowdowns.

Investment Thoughts

Credits: DepositPhotos

Manitowoc presents a compelling investment opportunity with its low price-to-earnings ratio, strong backlog, and insider confidence.

While there are macroeconomic risks, including a potential recession, the company’s solid growth prospects and the expected benefits from economic stimulus measures and infrastructure projects provide significant upside potential.

Investors should consider buying a small position to monitor the stock closely, with the potential to increase holdings if economic conditions stabilize.


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