Mostly Not Cranes
We see few names in the Industrials sector that are as undervalued and underappreciated as Manitowoc. MTW offers a clear revaluation catalyst with the 1Q 2016 split of the Foodservice Equipment unit from the Cranes business. We see significant upside potential from the market’s reappraisal of these solid but stunningly mismanaged franchises. In our experience, investors often get bogged down in Crane segment cyclicality and miss the broader operating improvement and value-unlock opportunity. While it is common for companies to trade poorly ahead of transformational break-ups, the recent decline in MTW shares provides a straightforward value opportunity in an otherwise challenged sector.
- Foodservice Equipment Drives Value: An independent, better performing Foodservice Equipment segment is alone likely to receive a higher valuation than the current combined companies.
- Implied Negative Value For Cranes: Buyers are being paid to take the Crane unit, by our estimates, despite the potential for better performance or a sale of this ‘Cadillac’ of cranes producer.
- Sabotaging, Weak Management Out: As we see it, prior management made efforts to undermine the separation, and recent c-suite changes are a significant positive.
- Long-term View of Metrics, Operating Potential: We will review crane market cyclicality, currency exposure, and foodservice equipment market drivers.
- Opportunities For Better Management: Improved management could execute botched facilities rationalizations, price innovative products more effectively (VPC), or just deliver products & services on time.
- Valuation Upside: We value MTW’s two separate companies $20/share or higher. A sale of either unit is also possible, and we note the current interim CEO is from Bucyrus.
We will conclude the call with a live Q&A session. Industrials subscribers will receive the dial-in and materials link in a reminder email prior to the call.