$9.45
-0.42 (-4.26%)
Manitowoc Company, Inc. (MTW)
CAPS Rating:
The Company is a diversified, multi-industry manufacturer of engineered capital goods and support services for selected market segments, which includes Cranes and Related Products, Foodservice Equipment, and Marine.
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Recs
Z-score of 1.12 for 2008 figures
normally means they have a better than 50/50 chance
of going bankrupt in the next 2 years.
Paying $2.7 billion for Enodis is partly to blame for low Z-score,
but it has also left them with $2.5 billion LT debt.
Their markets (cranes and food-service equipment) are both susceptible to a recession, so am expecting their sales & profits to be hard hit over the next 2 years or so.
From MTW's 2008 10-K:Management predict crane sales falling back to 2007 levels ( -15% ignoring the $154 mil on $ : Euro exchange ). OKManagement predict +12% growth in food equipment sales ( after adding in Enodis sales, pro-rat from last 2 months of 2008 ). Hmm.If they don't pay down any debt, their interest payments in 2009 will be around $155 million.Conditions on the debt include sliding scale ratios:( for years . . . . . . . . . . . . 2009 2010 beyond )EBITDA : Interest more than . . . . 2.5 . 2.75 3.0Total debt : EBITDA less than . . . 4.0 . 3.75 3.5Using their numbers (and allowing for Enodis) the EBITDA : interest is OK (3.6), but their total debt : EBITDA is currently around 4.6. They will have to pay off around $380 million during 2009 to avoid defaulting.Management claims they will pay down $1 billion in 2009, but with the slowdown in the crane market, they are going to have a lot less cash to play with. They do have to sell off the 'Ice' parts of Enodis - I don't see any indication in the 10-K of how much they think they will get for that, but it will be $175 million less than they originally planned!Their 'assets' in 2008 include $2 billion of goodwill & intangibles, mainly from the purchase of Enodis ( Enodis 'tangible' assets were worth less than Enodis liabilities when MTW bought them, so all the $2.1 billion purchase price has gone down in the books as intangibles and goodwill ).Stripping the intangibles out of the assets before comparing them to the liabilities changes the picture a little!
"They will have to pay off around $380 million during 2009 to avoid defaulting"A measurement of current assets to current liabilities is more indicative of covering in near to short term failure. That measurement is fine for the time being. It's more than 1.25, and if you strip out everything and look at cash to debt, they have the cash to pay that now. Also I have 180 million of short/long term current debt. i.e. that which must be refinanced or paid this year. The CAPS community is overwhelmingly in favor of this one based on potential. Also the food services segment provides a nice cash flow that's unlikely to be interrupted. I'd say if they can survive, this could be a 10 or 20 bagger (multiple).
Hefty haircut today. Will TMF still give it 5 stars after today?
The question you have to ask is do you expect DOW Chemical to be a survivor in a 5 year time stretch? If the answer is yes AND the company is trading at 60 to 80% less that the Standard and Poors average valuation then it is a good choice. Low P/E and if it just comes back to S&P averages, you have made a ton a money. Look at the companies that make wealth by producing new goods from raw materials rather than services to have the best rebound.They have already been beaten up and are a steal with a low risk on the downside since they have been bloodied badly. My only gripe to my strategy is that when they dropped to $6 a share I didn't do a gut check and buy another 3,000 shares.
DOW Chemical?
Well yeah. Dow? Manitowoc? Whatever.
Stromprophet:
10 to 20 bagger?!?!?! Seriously?!?! With the amount of debt MTW has saddled with this acquisition and the fact that Motley Fool's own hidden gem darling (MIDD) is their direct competition in the commercial food segment, I don't see MTW having a market cap of 10B ANYTIME SOON... or ever.