Manitowoc (MTW), the Wisconsin-based global manufacturer of construction cranes and food service display, vending and storage products, has suffered with the rest of the construction industry as housing starts and commercial construction activity slowed to a crawl in 2008.
On January 29th, the company issued its fourth quarter and full year results for 2008, reporting an increase in sales for the quarter of 16%. Earnings were affected by costs related to the acquisition of Enodis and the divestiture of Manitowoc’s Marine segment.
Poised For a Stimulus
Prior to the inclusion of special items related to these transactions and other tax related matters, Manitowoc earned $407 million for the year, as compared to $341 million in 2007. Guidance for 2009 remained at earnings of $1.35-1.60 per share.
As the leading manufacturer of cranes and related lift equipment in the world, there is no doubt that MTW is feeling the pain of a fractured economy. It is equally clear, however, that MTW’s position in the marketplace for their products positions them well for the economic stimulus package.
With the package’s emphasis on infrastructure, particularly highways, bridges, public buildings and water resources, demand for lifting equipment is likely to soar.
Although the American Recovery and Reinvestment Act is not likely to be fully implemented until early 2010, it is probable that construction companies and others will begin ramping up the purchase of equipment in anticipation of new contracts as soon as the stimulus package is passed and signed.
MTW is also a leader in its other primary business, the manufacturing of commercial food-service equipment. The closing of its purchase of Enodis in October of 2008 will increase the revenue from the food-service equipment business by 200% and will contribute to the company’s bottom line.
The food-service equipment business is also likely to benefit from the stimulus package, which includes school and institutional modernizations and investment in green energy equipment.
MTW has a strong balance sheet which insulates them from the vagaries of the construction business. A debt-to-equity ratio of 1.7 compares favorably to the industry average of over 2.25. The company has stated its intent to reduce long term debt by$1 billion in 2009.
A current ratio of 1.426 also compares favorably to competitors.
Manitowoc bonds due in 2013 carry a coupon of 7.125% and currently trade at 80.25, providing the investor with a yield of 12.83%. Callable at a premium later in February of 2009, investors should find the returns from the purchase of Manitowoc bonds attractive whether called or held to maturity.