With two polar-opposite businesses to handle, things can't be very easy for Manitowoc
Two factors in particular seem to be big concerns and could hinder Manitowoc's future growth.
Need to look East
One drawback for Manitowoc is Europe, which is one of its biggest markets. It alone accounts for nearly 22% of the company's total sales. Clearly, with Europe struggling, low demand from the region could plague Manitowoc for a long time. What makes things tougher is its overdependence on developed markets.
Sales from North America and Europe accounted for more than 70% of Manitowoc's total sales last year. Compare this with Caterpillar
Need to buck up
Heavy debt, low cash balances, and net losses sum it up. Manitowoc's total debt-to-equity ratio is at a whopping 401.2% and its interest coverage is a mere 1.4 times. For a total debt of $1.89 billion, Manitowoc's cash and equivalents is just $68.6 million, while unlevered free cash flow is at $211 million. Its operating (earnings before interest and tax) margin has been languishing at about 6%.
Because of such high leverage, there is little scope for Manitowoc to go ahead with expansion programs or return value to its shareholders. It sports a return on equity of just 4.4% and a meager 0.5% dividend yield.
The Foolish bottom line
Although Manitowoc has mentioned debt reduction and growth initiatives as its priorities for this year, we'll have to see how effectively it balances these things. Competition is tight, but opportunities are plenty. Manitowoc needs to pull up its socks to become an all-around package.
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Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.