Manitowoc (NYSE: MTW) is an interesting company operating two totally different businesses. How well it is managing them was evident from its outstanding fourth-quarter numbers. But no company is perfect, and only a detailed scrutiny can give us a clear picture. Let's take a look into the crane maker's strengths, weaknesses, opportunities, and threats to determine exactly where it stands.
Strengths
- Strong core business: Manitowoc's crane segment is bouncing back well after the recession. Sales surged 40% in the last quarter, representing the highest such year-over-year growth since 2007. Orders also climbed to a level last seen in 2008.
- Interesting diversity: More than a third of Manitowoc's revenue comes from its food service equipment business. The segment is growing fast with new product launches, and its customer list boasts of big names such as McDonald's and Yum! Brands.
- Focus on innovation: The company is aggressively expanding its product portfolio. It launched 12 crane products and 50 food service products in 2011 and has plans for more this year. Its offerings have also won several awards over the past few years.
- Reaching out: Manitowoc is increasing its focus on fast-growing markets such as India, Brazil, and China. Revenue from the Asian markets has doubled in the last five years, and its expansion moves should drive the top line further north.
Weaknesses
- High debt: Manitowoc's total-debt-to-equity ratio of nearly 400% is worrisome. Its cash balances are also low at $71.3 million, and interest coverage of 1.4 times is just adequate.
- Europe challenge: Europe is one of the biggest markets for Manitowoc. Along with the Middle East and Africa, it accounts for nearly 44% of the company's revenue. Softer demand from the region is resulting in lower revenue for the company.
- Supplier woes: Supply chain bottlenecks have been affecting the company for the past few quarters, delaying crane shipments.
Opportunities
- Lifting high in Brazil: Manitowoc is set to become the first player to launch rough-terrain cranes in Brazil once its new manufacturing facility begins production by mid-2012. This comes at a time when Brazil is bracing for the 2014 World Cup and 2016 Summer Olympics.
- Emerging market potential: China and India could be big hunting grounds for Manitowoc's cranes, as these nations spend more on infrastructure to propel economic growth. China's easing of lending restrictions on local banks may fuel higher infrastructure-related lending, giving Manitowoc a chance to penetrate deeper into the market.
- Customer-driven growth: Association with food companies can help Manitowoc's food service equipment business gain greater traction not just in the U.S. but also in developing nations where these food majors are expanding big time.
Threats
- Eurozone fears: Impending crisis in Europe remains a big concern for Manitowoc. If the situation worsens, Manitowoc's top line could take a substantial hit.
- Slow home economy: As long as construction activity in the U.S. stays sluggish, Manitowoc's revenue could remain under pressure.
The Foolish bottom line
Manitowoc's growing food service equipment segment is complementing its solid crane business well. The company's high fourth-quarter revenue, despite some weak markets, raises hope Manitowoc can resist any economic slowdown. Manitowoc should continue to reward its shareholders down the road.
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