Seeking Alpha: Komatsu Looking For A Foothold

Six months ago, I thought investors could afford to wait on buying into Komatsu (OTCPK:KMTUY) (6301.TO), as this Japanese manufacturer of construction and mining equipment was likely looking at a multiyear process of demand repair. I don't think investors have really missed out on much - the roughly 8% drop in the ADRs since then is not catastrophic (certainly not relative to Joy Global's (NYSE:JOY) 31% drop), but investors would have done better in Caterpillar (NYSE:CAT), Volvo (OTCPK:VOLVY), Terex (NYSE:TEX) or by avoiding the space altogether.

Looking ahead, there's arguably a little more value in the shares but the outlook still isn't promising. There's a real threat that U.S. equipment demand isn't going to get much better and that growth in Europe won't offset weakness in Asia and particularly China and Japan. Komatsu does have an opportunity to stand out on a relative basis with its automation initiatives and internal cost reductions, but I'm not sure there's enough upside to make the wait a comfortable one.

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Komatsu Looking For A Foothold

Investopedia: Komatsu Looks Like A Winner, But Valuation Is Tricky

Most American readers will be well aware of the significant share and scale that Caterpillar (NYSE:CAT) enjoys in the construction and mining industries. What may be less appreciated is that Japan's Komatsu (Nasdaq:KMTUY) enjoys similar scale on a global basis, and has done quite well for itself in markets like China and Indonesia. What's more, Komatsu has made considerable investments in a variety of automation technologies that could set its equipment apart in the coming years. Valuation here isn't a simple exercise, but a multi-metric analysis suggests that Komatsu may well be cheap enough to merit serious investment consideration.

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Seeking Alpha: Relief Will Only Carry Caterpillar So Far

Earnings from heavy machinery specialist Caterpillar (CAT) certainly gave investors a little relief, but they shouldn't underestimate the risks to growth over the next 12-18 months. While this company certainly does have solid long-term prospects, the possibility of long-term gain isn't always enough to assuage the short-term pain that can go with wholesale institutional abandonment of a sector.

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Relief Will Only Carry Caterpillar So Far

Seeking Alpha: Growing Markets Could Lift Manitowoc Higher

Manitowoc (MTW) is an odd industrial company, as it combines a fairly steady food service equipment business with a leading (but extremely cyclical) crane business. Counting on the future to be just like the past is admittedly dangerous, but if Manitowoc's crane business follows pretty consistent historical patterns, investors may have several more years of improving sales and cash flow to look forward to, as well as an undervalued stock.

Food Service - Smaller, But Usually More Profitable
Although the crane business produces more revenue for Manitowoc, the food service business is both more consistent and generally more profitable across a full cycle. For better or worse, this is a story unlikely to produce a lot of surprises either good or bad.


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Growing Markets Could Lift Manitowoc Higher

Investopedia: CAT's Costs Rising, But Revenue Rising Faster

This summer saw almost indiscriminate selling across the industrial stock sectors. Companies like Caterpillar (NYSE:CAT), Cummins (NYSE:CMI), Eaton (NYSE:ETN), and Dover (NYSE:DOV) were all swept up in this rush to sell, even though the underlying businesses are so very different. As Caterpillar reminded the Street with its earnings report, the global construction and mining business is still quite healthy and there is plenty of business left to be done.

Solid Third Quarter Results  
Analyst estimates on CAT fell more than 10%, in the weeks and months before the earnings report, and the company did well, relative to those lowered expectations. Revenue, excluding finance, rose 44% as reported, or 11% on a sequential basis, and 28% on an organic basis; virtually all of that growth came from increased volume. Including the finance operations, consolidated revenue rose 41%.

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Investopedia: Digging Into A Joy Global Rumor

About a month ago I reviewed mining equipment company Joy Global's (Nasdaq:JOYG) earnings and speculated that "It might also be worth wondering, though, whether the company would consider additional deals - say like the acquisition of International Mining Machinery, China's leading mining equipment company - to expand into particular regional markets." Now Bloomberg, Reuters, and several other sources are reporting rumors that the two companies are in advanced merger discussions. 

The Deal That May Be  
Prior to these rumors leading to a halt in trading of International Mining Machinery's (Nasdaq:ICMHF.PK) shares on the Hong Kong exchange, the company carried a $1.1 billion market valuation. Although IMM's share price has been depressed a bit on fears of a slowdown in economic activity and the widespread expectation that major owner Jordan (which owns 41% of shares) will be selling shares, Joy Global will likely need to offer something on the order of $1.3 billion to get a deal done. 


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