dancingdiva

Manitowoc Offers Investors Growth at a Discount

And I am saying growth is a hindsight phenomena. Take a look at past cyclical downturns and how far earnings could fall and then tell me debt doesn't matter. Recent world statistics have been showing a major slowdown in most regions of the world, and since the inflation and high interest rates felt by most economies are a relatively recent phenomena, the statistics have yet to catch up to how slow the economies may get.

Putting money into this sector, whether it's Manitowoc, Terex, Caterpillar, etc may be the smartest move in the world if economic conditions don't deteriorate further, but everything I see tells me caution is warranted. This reminds me of the debate on how cheap housing stocks looked after they began their descent, when prices peaked a full year ahead of revenues.

And taking on a high debt load at what may be the top of the cycle leaves them in a more precarious position and unable to take advantage of the bargains which may emerge.

Whether prices move even lower and all negative news is priced in is debatable; but I've caught a "falling knife" in the past only to see earnings deteriorate and prices move even lower. I don't think there is anyone who hasn't fallen victim to that phenomena at least once. So perhaps I'm overly cautious.

Manitowoc Offers Investors Growth at a Discount

Frugal2000 - The biggest drawback to Manitowoc right now is what happens if there is a significant global slowdown. Assuming no asset sales, like their Marine division, they will be taking on debt equal to two-thirds of their pre-Enodis market cap. In this environment that's a risky proposition.

I've always liked Manitowoc; it's a great company. In fact I owned shares in the company until May, when my concerns over the global economy combined with the Enodis debt prompted me to sell. Right now I prefer Terex, although it too could be dead money in a global slowdown. Both stocks are cheap, but Tex has the added advantage of smaller debt and a huge buyback.

Manitowoc Offers Investors Growth at a Discount

Several faults with your argument.
1. If it was just Enodis, why did both MTW and Tex fall by the same amount over the past two months? My bet it was fear of a global slowdown combined with overall market weakness.
2. Your comparisons to Terex is very faulty. While I agree MTW is the king of cranes, Tex crane sales and earnings over the past two quarters rose more than Mtw's on a percentage basis. Additionally, Tex has an aftermarket service, but doesn't highlight it the way MTW mgmt does theirs. It's obvious by the numbers Tex hasn't suffered in comparison since their margins are growing faster.
3. You say MTW has a greater global exposure, but in 2007 Tex non-US sales were 70% vs Mtw's near 50% (their 2007 report said 53% for "the America's").
4. You neglect to mention Terex' booming mining business that has so far more than made up for the small decline in their AWP business.

I realize your aim was to promote Manitowoc. Yet, your homework and research against what you consider their main competitor was extremely poor. Additionally, your primary thesis that MTW is just being punished over Enodis is outright incorrect since both companies fell by almost the exact same % prior to Tex mgmt's buyback announcement.

Over the past week, both in this weeks Barron's and today on CNBC two different people commented Terex didn't get any respect. It's shoddy research like this that contributes to that opinion.