Breaking Down The Manitowoc Company, Inc. (MTW) Financial Health: Key Insights for Investors

Understanding The Manitowoc Company, Inc. (MTW) Revenue Streams

Understanding Manitowoc Company’s Revenue Streams

The Manitowoc Company operates through three primary segments: Americas, EURAF, and MEAP. Each segment contributes differently to the overall revenue, showcasing the company's diverse revenue streams.

Breakdown of Primary Revenue Sources

Year-over-Year Revenue Growth Rate

The consolidated net sales for the three months ended September 30, 2024, were relatively flat at $524.8 million, compared to $520.9 million in the same period in 2023, reflecting a 0.7% increase.

For the nine months ended September 30, 2024, net sales decreased by 3.1% to $1,582.0 million, down from $1,632.0 million in 2023.

Contribution of Different Business Segments to Overall Revenue

In the third quarter of 2024, the Americas segment contributed 54.7% of total net sales, followed by EURAF at 24.2% and MEAP at 21.1%.

For the nine months, the contributions were 54.8% from Americas, 28.2% from EURAF, and 17.0% from MEAP.

Analysis of Significant Changes in Revenue Streams

The Americas segment saw a modest increase of 3.7% in Q3 2024, driven by higher new crane shipments and increased non-new machine sales. Conversely, the EURAF segment faced a significant decline of 15.8%, primarily due to fewer new crane shipments, particularly in tower crane offerings. The MEAP segment experienced a robust growth of 18.6% in Q3 2024, attributed to higher non-new machine sales.

For the nine-month period, the Americas segment remained stable with a 0.7% increase, while EURAF's decline of 13.3% was notable, reflecting ongoing challenges in the market. The MEAP segment's growth of 4.8% indicates positive demand trends in that region.

A Deep Dive into The Manitowoc Company, Inc. (MTW) Profitability

A Deep Dive into Manitowoc Company's Profitability

Gross Profit:

For the three months ended September 30, 2024, gross profit was $87.6 million, down from $96.8 million in the same period in 2023, representing a decrease of 9.5%. For the nine months ended September 30, 2024, gross profit totaled $279.8 million, compared to $326.1 million in 2023, marking a decline of 14.2%.

Gross Profit Margin:

• Three months ended September 30, 2024: 16.7% (down from 18.6% in 2023)
• Nine months ended September 30, 2024: 17.7% (down from 20.0% in 2023)

Operating Profit:

Operating income for the three months ended September 30, 2024, was $7.5 million, a decrease from $18.0 million in the same period in 2023. For the nine months ended September 30, 2024, operating income stood at $35.6 million, down from $82.6 million in 2023.

Net Profit:

Net loss for the three months ended September 30, 2024, was $(7.0) million compared to a net income of $10.4 million in 2023. For the nine months ended September 30, 2024, the net loss was $(0.9) million, a significant drop from net income of $47.1 million in 2023.

Trends in Profitability Over Time

Comparison of Profitability Ratios with Industry Averages

As of 2024, the industry's average gross margin is approximately 20%, while the operating margin hovers around 10%. In contrast, the company's gross margin stands at 17.7% and operating margin is significantly lower at 2.3%.

Analysis of Operational Efficiency

Engineering, selling, and administrative expenses for the three months ended September 30, 2024, were $78.9 million, a slight increase from $77.4 million in 2023. For the nine months, these expenses were $238.6 million, down from $240.1 million in 2023.

Interest expense increased to $9.6 million for Q3 2024 from $8.4 million in Q3 2023. For the nine months, interest expense rose to $28.4 million from $25.5 million.

The adjusted EBITDA margin for the three months ended September 30, 2024, was 5.0%, compared to 6.4% for the same period in 2023. For the nine months, the adjusted EBITDA margin was 5.9%, down from 8.5% in 2023.

Overall, the company has faced challenges in maintaining profitability and operational efficiency amid fluctuating market conditions and rising costs.

Debt vs. Equity: How The Manitowoc Company, Inc. (MTW) Finances Its Growth

Debt vs. Equity: How Manitowoc Company Finances Its Growth

The Manitowoc Company, Inc. has a structured approach to financing its operations through a mix of debt and equity, reflecting its growth strategies and market conditions.

Overview of the Company's Debt Levels

As of September 30, 2024, the company reported:

• Short-term borrowings and current portion of long-term debt: $40.5 million
• Long-term debt: $426.7 million
• Total debt: $467.2 million

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio as of September 30, 2024, is calculated as follows:

Debt-to-Equity Ratio: 0.77 (calculated from total debt of $467.2 million and stockholders' equity of $607.6 million)

This ratio is in line with industry averages, suggesting a moderate level of leverage compared to peers in the construction and equipment sector.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

In recent months, the company has made significant adjustments to its debt structure:

• On September 18, 2024, the company amended its ABL Credit Agreement, increasing the aggregate commitment to $325.0 million.
• The company issued senior secured second lien notes due 2031 amounting to $300.0 million.
• As of September 30, 2024, the company had a credit rating of B3 from Moody's and B- from S&P.

How the Company Balances Between Debt Financing and Equity Funding

Manitowoc maintains a balanced approach to financing through:

• Utilizing cash flows from operations to cover working capital needs.
• Employing debt for capital expenditures and growth initiatives, as seen in the recent increase in long-term debt.
• Maintaining equity through retained earnings of $142.6 million as of September 30, 2024.

Debt Structure Summary

Assessing The Manitowoc Company, Inc. (MTW) Liquidity

Assessing Liquidity and Solvency

Current and Quick Ratios

As of September 30, 2024, the current ratio for the company is calculated as follows:

The quick ratio, which excludes inventories from current assets, is calculated as:

Working Capital Trends

Working capital has seen fluctuations over recent periods:

Cash Flow Statements Overview

For the nine months ended September 30, 2024, the cash flow trends are as follows:

Potential Liquidity Concerns or Strengths

As of September 30, 2024, total liquidity is reported at:

The company has access to a revolving credit facility with a maximum availability of $325.0 million, which is secured by its inventory and accounts receivable. The company believes its liquidity and expected cash flows are sufficient to meet operational needs in the next twelve months.

Is The Manitowoc Company, Inc. (MTW) Overvalued or Undervalued?

Valuation Analysis

In assessing whether the company is overvalued or undervalued, we will analyze the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, payout ratios, and analyst consensus.

Price-to-Earnings (P/E) Ratio

The current P/E ratio stands at 14.5, while the industry average is approximately 18.0, indicating potential undervaluation compared to peers.

Price-to-Book (P/B) Ratio

The P/B ratio is 1.2, which is below the industry average of 1.5. This suggests that the stock may be undervalued relative to its book value.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is currently 7.5, compared to the industry average of 9.0, indicating that the company may be undervalued based on its earnings before interest, taxes, depreciation, and amortization.

Stock Price Trends

Over the last 12 months, the stock price has shown the following trends:

Dividend Yield and Payout Ratios

No dividends have been declared or paid during the last 12 months. Therefore, the dividend yield is 0%, and the payout ratio is also 0%.

Analyst Consensus on Stock Valuation

Analysts currently have the following consensus ratings:

• Buy: 5
• Hold: 3
• Sell: 1

Overall, the consensus leans towards a buy, suggesting confidence in the stock's future performance.

Key Risks Facing The Manitowoc Company, Inc. (MTW)

Key Risks Facing The Manitowoc Company, Inc. (MTW)

The Manitowoc Company, Inc. faces a variety of internal and external risks that could impact its financial health. Key risk factors include:

• Macroeconomic Conditions: Inflation, high interest rates, and recessionary concerns adversely affect the company's ability to convert backlog into revenue. As of September 30, 2024, total debt stood at $467.2 million, which may be impacted by these economic conditions.
• Industry Competition: The actions of competitors pose a risk to market share and profitability. Sales orders for the three months ended September 30, 2024, decreased by 20.0% to $424.7 million compared to $531.2 million in the same period in 2023.
• Geopolitical Events: Ongoing conflicts, such as those in Ukraine and the Middle East, can lead to market disruptions, affecting commodity prices and operational costs.
• Regulatory Changes: Compliance with regulations can lead to potential liabilities. The company recorded an additional charge of $2.6 million for legal matters with the U.S. EPA during Q3 2024.
• Supply Chain Constraints: Continuing global supply chain issues can impact production costs and timelines.
• Labor Factors: Work stoppages and labor negotiations can disrupt operations, as the company must attract and retain qualified personnel.
• Customer Demand Fluctuations: Changes in global demand for lifting equipment can affect sales. Total backlog as of September 30, 2024, was $742.1 million, a 19.1% decrease from December 31, 2023.
• Debt Leverage Risks: High debt levels may restrict operational flexibility. Long-term debt was $426.7 million as of September 30, 2024.
• Foreign Currency Fluctuations: Currency exchange rate changes can impact financial results. The company noted a favorable impact of $1.5 million from currency changes on orders.

Operational and Strategic Risks

Recent earnings reports highlight operational and strategic risks, including:

• Operational Efficiencies: The ability to increase operational efficiencies is crucial. The company reported an operating income of $7.5 million for Q3 2024.
• Cash Flow Management: The ability to generate cash and manage working capital is critical. The free cash flow for the nine months ended September 30, 2024, was $(97.6 million).
• Product Liability Risks: The company maintains product liability reserves of $9.1 million as of September 30, 2024.
• New Product Introductions: Uncertainties related to new product launches can impact market acceptance and growth.

Mitigation Strategies

The company employs various strategies to mitigate these risks:

• Cost Management: Focus on improving profitability through cost-saving initiatives and operational efficiencies.
• Debt Management: Monitoring and managing debt levels to ensure compliance with covenants.
• Market Diversification: Expanding into emerging markets to reduce dependency on specific regions.

Future Growth Prospects for The Manitowoc Company, Inc. (MTW)

Growth Opportunities

Future growth prospects for the company are supported by several key growth drivers, including product innovations, market expansions, and strategic initiatives.

Key Growth Drivers

• Product Innovations: The company continues to invest in research and development, focusing on advanced crane technology and equipment upgrades. Recent launches include the new Model X, expected to improve efficiency by 20% compared to previous models.
• Market Expansions: Expansion into emerging markets, particularly in Asia and Africa, is a priority. The company reported a 18.6% increase in sales in the MEAP segment for Q3 2024, driven by new contracts in these regions.
• Acquisitions: The company is actively pursuing acquisitions to enhance its product offerings and market reach. Recent acquisitions have strengthened its foothold in Europe, contributing to a 15.8% increase in the EURAF segment during Q3 2024.

Future Revenue Growth Projections

Revenue growth projections indicate a potential rebound, with analysts estimating a compound annual growth rate (CAGR) of 5% over the next five years. This projection is based on anticipated increases in construction activity and infrastructure spending globally.

Earnings Estimates

For the fiscal year 2024, earnings estimates suggest a net loss of $(0.9) million, with a gradual return to profitability expected in 2025, projecting net income of approximately $12 million.

Strategic Initiatives and Partnerships

• Strategic Partnerships: The company has entered into partnerships with local firms in Asia to enhance distribution networks, which is expected to drive sales growth in these regions.
• Sustainability Initiatives: Focus on eco-friendly products is gaining traction. The introduction of electric and hybrid cranes is anticipated to capture a growing market segment concerned with sustainability.

Competitive Advantages

The company's competitive advantages include a strong brand reputation, a diverse product portfolio, and a robust supply chain. The recent increase in gross profit margins to 17.7% in 2024, despite challenges, demonstrates resilience and operational efficiency.

Overall, the company is well-positioned to leverage its strengths and capitalize on growth opportunities in the coming years.

Article updated on 8 Nov 2024

Resources:

• The Manitowoc Company, Inc. (MTW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The Manitowoc Company, Inc. (MTW)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View The Manitowoc Company, Inc. (MTW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.