New Crane Models And Service Expansion Expected To Mitigate Challenges In Global Markets

Key Takeaways

• Launching 13 new cranes including innovative models is expected to drive future revenue growth and meet evolving market needs.
  
• Strengthened service teams and expanded service locations are likely to enhance customer service, boosting aftermarket sales and customer retention.
  
• Intense competition and economic challenges in key regions threaten Manitowoc's profitability and revenue stability amid market fluctuations and political upheaval.

Catalysts

Provides engineered lifting solutions in the Americas, Europe, Africa, the Middle East, the Asia Pacific, and internationally.

• The successful launch of 13 new cranes, including innovative models such as the next-generation EV self-erecting tower crane, is expected to drive future revenue growth as they meet evolving market needs and expand product offerings.
  
• Expansion of field service technician teams by 7% and the strategic increase in service locations is likely to enhance customer service capabilities, thus positively impacting future earnings by boosting aftermarket sales and customer retention.
  
• Strengthening in the Americas post-election and optimism about market demand, along with a marginal recovery in the European tower crane market, is anticipated to contribute to revenue growth and improve net sales.
  
• The increase in non-new machine sales by 67% since 2020 reflects a strategic shift towards higher-margin segments, potentially enhancing net margins and providing a more stable revenue stream less susceptible to crane market cycles.
  
• Enhanced liquidity and financial health achieved through debt renegotiation and successful cash flow generation provide a solid foundation to support strategic initiatives and operational growth, positively impacting future earnings and financial performance.

Manitowoc Company Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Manitowoc Company's revenue will grow by 2.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 2.6% today to 2.2% in 3 years time.
• Analysts expect earnings to reach $52.3 million (and earnings per share of $1.47) by about March 2028, down from $55.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.3x on those 2028 earnings, up from 6.1x today. This future PE is lower than the current PE for the US Machinery industry at 21.4x.
• Analysts expect the number of shares outstanding to decline by 1.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.25%, as per the Simply Wall St company report.

Manitowoc Company Future Earnings Per Share Growth

Risks

• The European tower crane market is at the bottom of its cycle, facing significant challenges and contributing to a 27% decrease in adjusted EBITDA year-over-year, impacting profitability.
  
• Intense competition from Chinese exporters globally is driving price compression in emerging markets, which could affect future revenue and margins negatively.
  
• The decrease in backlog by 29% year-over-year suggests potential future revenue shortfalls, especially if market conditions do not improve.
  
• The Asia Pacific market, particularly China and South Korea, presents challenges with no signs of recovery and political upheaval impacting sales, potentially hindering future revenue generation.
  
• Despite achieving some growth in non-new machine sales, the overall environment includes uncertainty, with persistent competition and economic challenges in key regions that may impact revenue stability and growth.

Valuation

• The analysts have a consensus price target of $12.117 for Manitowoc Company based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.0, and the most bearish reporting a price target of just $9.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.3 billion, earnings will come to $52.3 million, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 10.2%.
• Given the current share price of $9.62, the analyst price target of $12.12 is 20.6% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.