Why Manitowoc Stock Fell as Much as 14.3% Today

By Maxx Chatsko Markets Fool.com

Image source: Getty Images.

Continue Reading Below

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

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

Continue Reading Below

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.

10 stocks we like better than Manitowoc
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Manitowoc wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

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.