Is Manitowoc Company Inc. Stock Headed Lower After Soaring 23% in January?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Manitowoc (NYSE: MTW  ) investors must be laughing their way to the bank. The stock was off to a heady start this year, gaining a staggering 23% in January alone. It wasn't a smooth ride, though. The stock was up about 7% until Jan. 30, when a good earnings report sprinkled fairy dust the last day of the month, and Manitowoc shares shot through the roof to hit levels not seen in several years. But doesn't it appear a little overdone for one set of numbers?

So what: Investors had good news in store the very first week of January when Robert W. Baird and Morgan Stanley upgraded their ratings on Manitowoc shares, encouraged by the upward trend of non-residential construction activity. Morgan Stanley also found the stock undervalued, given the growth catalysts. Manitowoc shares soared 6% on a single day, only to give up those gains during the next two weeks after the company announced that it had off-loaded a 50% stake in a joint venture set up in 2008 with a Chinese company.

The development didn't go down well with the market for two reasons: The event resulted in losses of about $36 million; and more importantly, Manitowoc seemed to be losing ground in what is otherwise considered a huge growth market for construction equipment companies. Days later, China's manufacturing report turned out to be a bummer, and Manitowoc shares tanked as investors feared the worst for the company's remaining operations in the market.

And then the big earnings report came along. While Manitowoc's fourth-quarter revenue slipped 2% year over year, adjusted earnings from continuing operations surged 74%, backed by efficient cost control. While the company's key crane business missed the mark, investors were happy to see its food service equipment division report substantially higher revenue and margins. Manitowoc's guidance for 2014 also raised the hopes of investors and analysts alike -- Stifel Nicolaus was the latest to give a green thumbs-up to the stock.

Now what: January was a mixed bag for Manitowoc, but the pros certainly outweighed the cons. Manitowoc doesn't have as much at stake in China as Caterpillar does so, while bad, the news out of China shouldn't send investors scurrying for covers yet. Manitowoc reported a sharp 30% jump in fourth-quarter crane orders, as well as its best growth since 2009. With the much-awaited exhibition, ConExpo, coming up in March, those order rates could just head higher. Manitowoc's projections of higher revenue and margin growth from its food-equipment business for 2014 is even better news, because the business has otherwise been a dampener for quite some time.

Revenue is growing, margins are expanding, pent-up demand in the food service business appears to be opening up, and the construction market in the U.S. still looks good. But for now, the optimism may have already been baked into the share price, so a pullback can't be ruled out. But that should only give traders sleepless nights. Prudent Fools needn't worry. 

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