Manitowoc (NYSE: MTW ) will release its quarterly report on Monday, and even with the sluggishness in the economies of many of the fastest-growing countries in the world, shareholders believe that stock still has a lot of promise. The rapid growth in Manitowoc earnings in recent years is expected to slow for the quarter, but investors still look forward to a rapid acceleration in earnings growth in the years to come.
Most of Manitowoc's success has come from its production of cranes, with products ranging from the traditional building-top cranes that you've seen atop skyscrapers to specialized mobile telescopic cranes that allow workers to do heavy lifting in rough-terrain environments. But Manitowoc also has a food-service equipment business that diversifies its exposure somewhat from the construction industry. Let's take an early look at what's been happening with Manitowoc over the past quarter and what we're likely to see in its quarterly report.
Stats on Manitowoc
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past Four Quarters
Source: Yahoo! Finance.
What's holding Manitowoc earnings growth back?
Analysts have trimmed their views on Manitowoc earnings in the past few months, reducing their June-quarter estimates by a nickel per share and their full-year 2013 projections by more than twice that figure. Yet the stock has held up relatively well compared to its peers, rising 12% since late April.
Interestingly, Manitowoc actually started the quarter on the wrong foot, as it disappointed investors with a poor earnings report at the beginning of May. Although its crane segment posted reasonable sales growth of 7.8%, the food-service equipment business saw much slower revenue growth of 2% and actually reported a 3.7% drop in operating income.
The entire construction sector has taken huge hits due to sluggishness in Chinese growth, the continued European financial crisis, and unrest in areas like Brazil. Peer Terex (NYSE: TEX ) had to cut its full-year earnings guidance last month, with its construction and material- and port-handling businesses showing particular weakness. Yet the potential silver lining for Terex was its aerial works platforms division, which saw 21% growth in its most recent quarter. The aerial segment's success points to strength in the niche that Manitowoc shares with Terex.
Moreover, Manitowoc has managed to maintain a healthy backlog of orders that show the company's potential to sustain its long-term growth. With $776 million of outstanding crane orders as of March, the backlog represents about four months' worth of revenue for the segment, roughly in line with what industry giant Caterpillar's (NYSE: CAT ) $20.4 billion in order backlog equates to as a proportion of its much larger total revenue. Yet Manitowoc hasn't seen Caterpillar's substantial contraction in sales recently, pointing to the crane-maker's greater resiliency.
The big question facing Manitowoc is which of its promising segments has more potential. Food service has actually been a growth area lately, with commercial-oven maker Middleby (NASDAQ: MIDD ) seeing huge gains in its business and its stock as restaurant companies go through massive expansions around the world. Even if global construction activity stays depressed, the rising consumer classes in many emerging markets could help Manitowoc weather the storm by encouraging continued restaurant expansion.
In the Manitowoc earnings report, watch to see which segment produces the greater growth both this quarter and in company projections for the future. As long as the setbacks in the global economy prove to be normal cyclical downturns rather than permanent slowdowns, then Manitowoc's prospects to produce outpaced growth in future years look bright.
Manitowoc shows how you can profit from our increasingly globalizing economy just by investing in your own backyard. The Motley Fool's free report, "3 American Companies Set to Dominate the World", shows you more great ideas along the same lines. Click here to get your free copy before it's gone.
Click here to add Manitowoc to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.