Shares of erstwhile refrigerator manufacturer, now crane-maker, Manitowoc (NYSE: MTW) are up 15% as of 2:35 p.m. EDT.
Manitowoc shareholders can thank Wall Street analyst R.W. Baird for the helping hand. Earlier today, Baird announced it is upgrading Manitowoc shares ahead of Monday's expected earnings report. With Manitowoc stock selling for less than $6 a share before the upgrade, Baird posited a target price for the shares of $10 -- nearly a 100% potential profit for new investors.
What makes Baird so optimistic? In a word: Terex (NYSE: TEX).
Yesterday, Manitowoc's archrival in cranes announced a huge earnings beat, helped in part by a return to profitability from its cranes division. Given that Manitowoc also sells cranes -- and really, sells only cranes at this point -- that seems to bode at least as well for Manitowoc's future as it does for Terex's.
Baird believes that the global market for mobile cranes has just about reached its trough, and is due for a cyclical rebound. Terex's return to profitability in this segment, combined with that company's comment that its backlog of crane orders is up 29% year over year, suggests that Baird might be right.
That said, investors still need to be cautious before going in whole-hog on Manitowoc stock. While Baird is predicting a resurgence in crane demand, the analyst is still predicting that Manitowoc will lose money on cranes this year -- perhaps as much as $0.46 per share. If investors get too lulled into complacency by Baird's positive note, there's a risk they'll get shocked right out of complacency if all Manitowoc tells them next week is that it lost money in Q2, and expects to keep on losing more money this year.
With Manitowoc unlikely to report another full-year profit before 2018, patience is the virtue investors should seek with this stock.
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