The Top Play on Infrastructure Isn’t Caterpillar Inc.

Some industries thrive in a rebounding economy, others are more hit and miss. There's no better business to be in when the economy is booming than in cranes. One of the largest crane companies in the world is Manitowoc (NYSE: MTW  ) .

Its crane business continues to thrive, and it has a food equipment business that is capitalizing on the global population increase. Manitowoc gets just over 60% of its revenues from cranes, but another 40% comes from foodservice equipment. However, that could be about to change.

Shaking up Manitowoc
Relational Investors, one of the largest activists around, wants to break up the company. Owning 8.5% of the company, Relational notes that by separating the industrial and food equipment businesses, the stock would trade more in line with its peers. Relational is no stranger to breaking up big companies. Its big wins include breaking up B/E Aerospace and Timken.

Relational notes that Manitowoc's current business, which includes two segments, trades at a "perpetual discount, as reflected in the company's stock price performance and its EV/EBITDA multiple, which is more closely in line with its public crane comparable than its public food equipment comparable." The public food equipment companies generally trade at a premium to crane companies.

Crane and foodservice equipment is still a strong combo
Manitowoc expects top-line growth for both the crane and foodservice segments in 2014. The foodservice segment revenues grew 9% year over year during the first quarter, and should continue growing nicely as Manitowoc introduces new products. These include various new hot and cold products coming to market this year.

On the crane side, revenue growth should continue as emerging economies in Europe and the Middle East urbanize, increasing the demand for crane equipment. A couple of other key areas that could drive crane demand are the oil and gas markets and wind sector. The oil boom in the U.S. is proving to be a big positive for Manitowoc.

The rest of the industry
Caterpillar (NYSE: CAT  ) is one of the best known names in the heavy equipment business. The company is also very much a global company. While Manitowoc gets around 40% of its revenue from outside the Americas, Caterpillar gets 60% from beyond North America. Manitowoc has managed to outperform Caterpillar by two-fold over the last five years. Caterpillar has also come under fire from the likes of Jim Chanos.

Chanos' biggest gripe is that the mining and equipment business is in decline in China. So while its North American construction business is growing, China's growth is moderating. 

Chanos has pointed out a number of times that capital spending in the mining industry has likely peaked. Caterpillar gets around 20% of its operating profits from the resources industries. Chanos has reiterated that back in the early 90s, the mining industry was spending $5 billion a year, and spending peaked at $145 billion in 2012. Annual spending is now down to $120 billion and could fall further.

Dover Corp (NYSE: DOV  ) is another major industrial conglomerate. Its revenues are spread across various segments, with none accounting for more than 35% of total revenues. Its four segments include engineered systems, energy, refrigeration & food equipment, and fluids. But despite having a near $15 billion market cap, the stock is still fairly underrated. Manitowoc has outperformed Dover by over five-fold over the last five years.

This conglomerate is turning to acquisitions for growth. Earlier this year it snatched up MS Printing Solutions, which has given the company a larger presence in textiles, ultimately helping it expand beyond just the consumer and industrial markets. During the first quarter, revenues grew 7%, which included 3% contribution from acquisitions. For the full year 2014, revenue growth is expected to be in the range of 6% to 7%, with acquisitions adding 3%.

How shares stack up
While Manitowoc does have the highest P/E ratio of the three stocks, it has the lowest P/E to growth ratio (PEG), which is at 1.0. The other two stocks have higher PEG ratios, with Dover's coming in at 3.5 and Caterpillar at 1.5. Manitowoc also has the lowest P/S ratio of the three.

Meanwhile, Manitowoc's dividend yield is a mere 0.25%, but Dover's is 1.7% and Caterpillar's 2.5%. Digging a bit deeper, Manitowoc has the best return on investment (ROI). Its ROI is 14.1%, while Dover's is 13.2% and Caterpillar's is 7.4%.

Bottom line
Manitowoc has been a great performer with its crane and food service businesses. But a potential spinoff of the food business could help propel the company further into the industrial industry and help the company trade at higher multiples. For investors looking for a solid play on the global economy, Manitowoc is worth a closer look.

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