Manitowoc Co. Inc. (MTW) is a creator of market-leading engineered capital goods and services. It is one of the world's largest providers of heavy lifting equipment for the global construction industry. The company is a well-diversified industry manufacturer with 41 manufacturing and service facilities and operations in over twenty countries around the world, currently operating through three important markets: Crane & Related Products, Foodservice Equipment and Marine Operations covering the United States and the international markets.
Cranes and Related Products: This segment includes lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. This particular operation serves as the company's primary organic growth driver; worth noting here is that the Crane group robustly contributes to Manitowoc's overall sales to the tune of more than 75% and designs, manufactures and distributes a line of crawler and truck mounted lattice-boom cranes, which the company sells under the Manitowoc name.
There is also a line of top slewing and self-erecting tower cranes, sold under the Potain name, which are utilized primarily in the building and construction industry. Mobile telescopic cranes is another line in company's arsenal of products, capable of reaching tip heights of 427 feet with lifting capacities up to 550 tons sold under the Grove name. This specific line of cranes includes 35 models and it is utilized primarily in industrial, maintenance, commercial and construction applications.
The company also provides crane product services, crane rebuilding and remanufacturing services which are delivered under the CraneCare brand name. Manitowoc in this segment competes with Palfinger, Hitachi Sumitomo, Terex, Altec, Raimondi, Cattaneo, XCMG, Manitex and many other companies.
Foodservice Equipment Segment: Providing 14% of overall company sales, this segment offers the broadest line of cold-focused equipment in the foodservice industry. This particular operation designs, manufactures and markets commercial ice cube and flaker machines, walk-in and reach-in refrigerators, cast aluminum cold plates and commercial refrigeration equipment, compressor racks, modular refrigeration systems, backroom beverage equipment distribution services and many other products which are sold under Manitowoc, Flomatic, McCall, SerVend, Multiplex and other brand names.
In this segment, the company competes in this market with Scotsman, Follet, Ice-O-Matic, Automatic Bar Controls, Celli, Cornelius and Enodis among other competitors.
Marine Segment: Manitowoc, which began its operations in the mid 1920s as a shipbuilder, has also a marine segment accounting for 10% of the overall company's sales. This particular segment holds a leading position in the industry with shipyards that build, service, and conversion services for government, military, and commercial customers throughout the U.S. maritime industry.
Manitowoc operates three shipyards located in Marinette, Sturgeon Bay, Wisconsin, and Cleveland, Ohio.
The facility of Marinette Marine Corporation is a full-service dockyard, with in-house capabilities to design and construct the most complex vessels completely indoors. The Sturgeon Bay shipyard is involved in the construction of double-hulled tank vessels, articulated tug and barge units, dredges and dredging support equipment, along with bulk cargo self-unloading solutions. This shipyard specializes in large ship construction projects and repair work. The third and the last shipyard is the Cleveland Shiprepair facility, which specializes in all types of voyage and topside marine repair.
In this segment MTW competes with Atlantic Marine, Bender Shipbuilding & Repair, Bollinger- Lockport & Larose, Fraser Shipyards, VT Halter Marine and Port Weller Drydocks.
Manitowoc continues to evolve in each of these principal markets as an industry leader in market share, product innovation, and product support services.
The growing skylines around the world, starting from Dubai, UAE to Mumbai, India all the way to Beijing and Shanghai, China, have only one thing in common - cranes. The world's demand for cranes has experienced a substantial increase in the last four years. The construction market, on a global basis, is forecasted to solidly sustain growth through at least year 2015. Between fiscal 2005 - 2010 the compound annual growth rate is projected at almost 7%, followed by a CAGR of 6.0% for fiscal 2010-2015. Incremental growth essentially follows incremental demand and crane demand will continue to increase if not skyrocket, since the construction boom around the world shows no signs of slowing down, including our U.S. market which remains strong with the commercial construction side of things continuing to prompt more and more crane exigency.
Based on these favorable market conditions, Manitowoc stands to profit whether it is from a business profitability perspective or market share ownership. The company holds a unique market position which differentiates it from most of its competitors since it has a tendency of moving production closer to end users. Manitowoc is the only global crane company with a long-term manufacturing presence in China.
As a pioneer in the industry, coupled with a significant global presence, MTW holds a leading position in a commercial enterprise which has proven to be an excellent one in the last five to ten years. Competition is fierce, however; Manitowoc, based on its unique concepts and effective approach besides adaptability to market conditions, has been solidly able to constantly remain in a forefront market position. In addition, the company has a healthy financial aspect, strong order backlog, robust manufacturing and production capabilities (latest addition was that of Zhangjiagang's 805.000 square-foot facility which includes engineering, design center facility along with a testing yard in tower crane production, also Manitowoc has announced that it will build a plant in Slovakia to serve the eastern European market) with major new contracts consummated on a global basis.
The primary strategy of the heavy equipment maker, remains continuously focused on organic growth in global basis and in pursuing global strategic acquisitions. These strategic priorities are driven by growth, innovation (17 new cranes are planned for fiscal '07 involving M14000, GTK1100 and Potain Igo-T-70 models), customer focus, excellence in operations, organizational development and aftermarket support.
On January 3, 2006, The Manitowoc Company, Inc. completed the acquisition of ExacTech, Inc., a supplier of fabrication, machining, welding and other services to various parties. On May 26, 2006, the Company acquired McCann's Engineering & Mfg. Co. and McCann's de Mexico, S.A. de C.V. (McCann's). In July 2007, it acquired Shirke Construction Equipments Pvt. Ltd.
These acquisitions further emphasize Manitowoc's commitment in identifying and pursuing strategic acquisition opportunities that will further enhance its global business enterprise. Manitowoc is effectively and rapidly moving to meet market demand.
In fiscal '06, Manitowoc had the best year ever in the company's 104 years of existence. Led by its Crane Group's performance in posting record sales of more than $2.2 billion, the company posted its twelfth consecutive year of record revenues. This was not a coincidence, rather a systematic, well-projected, well-executed strategy, leading to significant results with one goal in mind, that of creating company value.
Manitowoc's momentum continued well into the first quarter of fiscal 2007 by posting growth in backlog and operating margin.Crane segment backlog increased sequentially by 24 percent to a record $1.9 billion. Net sales in the Crane segment increased by more than 40% to $682.8 million. In the Foodservice segment, net sales increased 4 percent to $97.0 million. Operating earnings were $10.9 million, an increase of 3 percent. Revenues for the Marine segment rose 33 percent to $82.3 million.There was a setting of records again for net sales, earnings per share and backlog.
Second quarter results fiscal ' 07 were equally impressive beating Wall Street prediction: On July 31, '07 MTW reported Crane segment sales rose 41 percent to $805.1 million, while food service segment sales increased 13 percent to $128 million and marine segment sales rose 36 percent to $85.5 million.
Based on the current market environment, management raised the Crane segment's 2007 revenue growth target from 20 percent to approximately 30 percent, or about $2.9 billion in net sales along with full-year earnings guidance range and outlook - by basing growth in sources from the core North American and European lifting markets as well as emerging markets.
MTW has a market cap of $5.44 billion with a peg ratio of only .79. The company's profit margin stand at 7.45% with almost 12% in operating ones. 32.05% return on equity and 11.12% in asset return. Revenues posted $3.43 billion for a gross profit of $648 million and a net income of almost $256 million. Earnings growth yoy came in at 131% allowing for an operating cash flow of $228.40 million. Since end of fiscal '03 to present fiscal '07 the company has allowed 13 cash dividends with the latest one of $0.02 paid as of August 29, 2007.
My take on MTW is that of continued expansion and a steady stream of revenues into the next several quarters. The company will continue to consolidate and profit from leveraging global manufacturing capabilities to increase sales and profit margins. New products will drive market share gains, helped by operational experience, technological and applicable platform along with sales and marketing capacity.
Manitowoc has increased its revenues and maintained a positive free cash flow in each of the past ten years. Positive economic value added in ten out of the last twelve years.
From a TA perspective, the stock's five year chart is nothing short of impressive and continues projecting more upside by continuously applying the stair-stepping pattern and forming a series of HH. Support from the stock's long-term moving averages have guided the equity to its current heights.
I believe MTW shares remain relatively undervalued in terms of its expected future growth. This company has a very attractive growth rate trajectory and revenue curve. Based on the company's history of solid financial performance, sequential revenue growth and substantial cash flow, this stock comes with a buy recommendation and price target of $74-$76 levels within a time frame of 9-12 months.