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What happened
Shares of capital-goods manufacturer The Manitowoc Company (NYSE: MTW) declined over 14% this morning, after investors digested 2016 earnings and 2017 guidance announced yesterday afternoon. Unfortunately, a difficult stretch for a struggling company won’t get any easier this year.
So what
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Sales declined for a third straight year, while net income of $0.48 per share in 2015 swung wildly to a net loss of $2.73 per share in 2016. The deteriorating performance was mostly driven by lower overall gross profit, expenses related to asset impairment and restructuring, and a large tax hit. Here are several important financial metrics from the most recent comparison periods:
Metric
2016
2015
% Change
Revenue
$1.61 billion
$1.86 billion
(13.5%)
Gross profit
$253 million
$332 million
(23.8%)
Earnings per share
($2.73)
$0.48
N/A
Cash
$69.9 million
$31.5 million
122%
Long-term debt
$269 million
$1,330 million
(79.8%)
Shareholders’ equity
$590 million
$842 million
(30%)
Cash flow from operations
($122.4 million)
($25.5 million)
N/A
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Data source: The Manitowoc Company.
There isn’t a whole lot to be encouraged about in last year’s performance. The company struggled with decreased demand in the Middle East and North America, spurred by lower drilling activity and lower crude oil prices. Cash flow from operations actually improved in the fourth quarter of 2016 compared to the year-ago period, but the full-year amount was significantly impacted by earlier charges.
Unfortunately, management believes things will continue to get worse in 2017. Here’s the current guidance for the year ahead:
Metric
Expectation for Full-Year Performance
Revenue
(8% to 10%)
Adjusted operating income %
(0% to 1%)
Capital expenditures
$30 million
Data source: The Manitowoc Company.
The good news is that The Manitowoc Company will continue to rein in costs in response to industry headwinds. Consider that the company spent nearly $11 million in capital expenditures in the most recent quarter, and $23 million in the fourth quarter of 2015. That should put a full-year expectation of $30 million into perspective. The bad news is that even that won’t be enough. Investors will need to stomach yet another year of hardship and losses if they want to hang onto shares.
Now what
The Manitowoc Company stock is now well below its 2014 peak of roughly $34 per share, but there doesn’t appear to be a reasonable path for the company to return to that level any time soon. Rising oil prices are unlikely to spur increased drilling activity this year, while many oil and gas companies are content to keep costs low with legacy assets rather than investing too much into production growth. That could all change if oil prices take a sharp — or prolonged — turn upward, although right now the current environment is not very favorable for the capital-goods manufacturer.
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Maxx Chatsko has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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