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Can Manitowoc Sell the Bulls?

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Cranes and food services equipment manufacturer Manitowoc (NYSE: MTW  ) recently gathered steam when it touched a new 52-week high. However, the bullish trend did not last long as widening losses dampened investor sentiments. The company's shares plunged 7% in trading after the bell last week, shortly after the announcement of Manitowoc's first quarter. What's forcing this volatility, and will the company see a prolonged bounce-back?

Let's delve into the financials of Manitowoc.

The financials
To begin with, let's consider its revenues. Manitowoc's revenues jumped 7% to $732.3 million in the first quarter compared with $684.4 million in the same period last year. Revenues during the quarter were mainly helped by the company's business expansion in its cranes and food services equipment segment through new products. And the recent run in the company's stock could be a factor of this. However, clearly these numbers didn't impress the market and, in fact, some strongly negative numbers going down the income statement overshadowed top-line growth.

The hurting numbers
An improvement in the company's top line on an absolute basis didn't translate into a better bottom line. In fact, the company reported a loss of $52 million, which was sharply higher compared with a loss of $23 million the same quarter last year. Losses from discontinued operations jumped to $10.6 million in the first quarter.

I suspect that Manitowoc would lose out on investors if it fails to get a grip on aggravating losses. The loss per diluted share worsened to $0.40 from $0.18 a year ago. Such a scenario doesn't bode well for a company that has been looking to boost its financial structure.  

Challenges for Manitowoc
With a higher debt-to-equity ratio, investors find Manitowoc in troubled waters. The ratio stands at a staggering 436.5%, up from 417.6% a year ago. To mitigate part of this concern, Manitowoc has already accepted a plan to refinance its revolving credit facility and update some loans. But will those steps bear fruit? Time will tell. For the time being, it's a major challenge for Manitowoc to cure its financial ills.

Apart from financial concerns, investors need to be aware of the competition Manitowoc is facing in the industry. Peers in the industry such as Caterpillar (NYSE: CAT  ) and Deere (NYSE: DE  ) and Manitowoc's immediate rival Terex (NYSE: TEX  ) have gradually expanded their businesses overseas. Manitowoc seems to be lagging behind when it comes to expanding its overseas operations. Perhaps it needs to boost its operations in different geographical areas to trim costs and improve margins.

The Foolish bottom line
With economic recovery and demand picking up gradually, Manitowoc expects to foster growth over the year. However, its efforts will be reflected in the subsequent quarterly earnings. For now, investors should be careful about their investment strategies and consider putting their pennies in financially stronger companies.

Anupama Pattanaik doesn't hold shares of any of the companies mentioned in the article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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