The first two months of the year have been nothing short of a roller-coaster ride for investors in Manitowoc Company (NYSE:MTW). After jumping 14.2% in the month of January, shares of the crane manufacturer crashed in February, ending the month down 11.4%. The stock's barely in the green year to date, as of this writing. What's going on here?
Like with most industrial stocks, Manitowoc shares caught Donald Trump's enthusiasm about rebuilding America's crumbling infrastructure. As a leading manufacturer of cranes, Manitowoc should benefit from higher infrastructure spending. But with the stock more than doubling since November, investors perhaps realized that it was time to tread with caution especially after construction-equipment heavyweight Caterpillar Inc. (NYSE:CAT) gave out a dismal guidance for 2017 in late January. Investors' fears were stoked when Manitowoc reported abysmal numbers for its fourth quarter on Feb. 1 and dashed hopes of a revival in the near future.
Manitowoc incurred losses worth $33.4 million in Q4 compared to net profits worth $43.5 million in the year-ago quarter as sales slumped 30% year over year. Worse yet, Manitowoc had only about $323.8 million worth in backlog value as of Dec. 31, 2016, compared to $513 million at the end of 2015. Not surprisingly, management projects revenue to fall another 8%-10% in 2017.
Granted, Manitowoc will benefit from higher infrastructure spending in the U.S., but it's too early to take a call. As of now, demand for construction equipment from North America remains weak, so much so that Caterpillar didn't hesitate labeling North America as one of the most "concerning regions" for 2017. What's more, Caterpillar doesn't expect to see any benefits from Trump's potential infrastructure boost until at least 2018.
There's another challenge facing Manitowoc: It's just been a year since it started operating as a stand-alone cranes company. With substantial losses on its books for the trailing 12 months, management has a daunting task ahead to turn things around especially given the cyclical and low-margin nature of the crane business. Investors shouldn't bank on President Trump's speeches alone, Manitowoc needs a lot more to give you your money's worth.