Manitowoc (MTW) Soars 63% YTD: Will the Rally Continue?

Shares of The Manitowoc Company Inc. MTW have been gaining this year, driven by the ongoing improvement in order levels and backlog, and an upbeat outlook for the year. The completion of the acquisition of the crane business of H&E Equipment Services, Inc. HEES has also contributed to the rally. The recent signing of the U.S infrastructure bill represents a huge opportunity for the company in the days ahead.

Manitowoc’s shares have surged 62.7% year to date compared with the industry’s growth of 16.1%. With a market capitalization of $766 million, the average volume of shares traded in the last three months was 248.6k.

Manitowoc (MTW) Soars 63% YTD: Will the Rally Continue?

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Manitowoc currently has a Zacks Rank #3 (Hold) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Driving Growth

Strong Order Levels: After being severely impacted by the COVID-19 pandemic in the first half of 2020, Manitowoc has been witnessing improvement in order levels and backlog since the last two quarters of 2020. Orders for the nine-month period ended Sep 30, 2021 increased 54.2% year over year to $1,546 million. This was primarily attributable to higher global demand. Backlog as of the end of the third quarter of 2021 was $890.6 million, up 92% from the year-ago quarter’s end and the highest seen in the last three years.

Upbeat 2021 Guidance: Manitowoc expects revenues in the range of $1.725 to $1.775 billion for fiscal 2021. The mid-point of the range indicates growth of 25% from revenues of $1.44 billion in 2020. Adjusted EBITDA is anticipated between $100 million and $110 million. The mid-point of the new range suggests growth of 26% from the adjusted EBITDA of $83.1 million in 2020.

Strategies to Grow Business in Place: The company’s focus on innovation will continue to aid it in leading the industry by providing differentiated products that add value to customers. Its aftermarket business continues to perform well and the company is taking steps to grow the business. In sync with this, Manitowoc acquired the crane business of H&E Equipment Services.

H&E Equipment Services’ crane business operates with 11 full-service branch locations. The purchase of its crane business is an important step in Manitowoc’s journey to grow the less cyclical part of its business. The company recently acquired all the assets of Aspen Equipment Company, which will expand its footprint in Nebraska, Iowa and Minnesota, and provide after sales services to a diversified end market.

Manitowoc remains focused on cash preservation and balance sheet management, while funding critical programs for growth. Its total debt-to-total capital ratio has gone down considerably over the years and was at 0.39 as of Sep 30, 2021. It continues to evaluate acquisition opportunities to accelerate product development programs in its all-terrain product line.

Manitowoc is ramping up its China tower crane business. China is the largest tower crane market in the world. The company plans to spend $15 million this year to expand its tower crane rental fleet in Europe. In all-terrain cranes, the company has the latest models lined up for launch at Bauma, the world’s leading construction machinery trade fair in 2022.

With the U.S Infrastructure Bill signed into law by President Biden, the perked up infrastructure spending represents a huge opportunity for Manitowoc. This is going to act as a catalyst for other companies in the industry like Caterpillar Inc. CAT and Terex Corporation TEX.

Given that Caterpillar is the largest global manufacturer of construction and mining equipment, it stands to benefit from the infrastructure bill immensely. The Zacks Consensus Estimate for the company’s earnings for fiscal 2021 is currently pegged at $10.36, suggesting year-over-year growth of 57.9%.

Caterpillar outpaced the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 30.2%. This Zacks Ranked #3 stock has gained 14.1% so far this year on the back of solid third-quarter 2021 results and robust backlog levels.

Terex’s backlog has been improving over the past four quarters, reflecting ongoing demand in its end markets. Backlog surged a whopping 237% year over year to $2,725 million in third-quarter 2021. This has led to a 38% gain in its share price year-to-date.

The Zacks Consensus Estimate for Terex’s 2021 earnings stands at $2.80, indicating a whopping growth of 2,054%. The company has a trailing four-quarter earnings surprise of 80.5%, on average.

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