Manitex Continues To Benefit From Market Recovery And Self-Improvement

Healthy construction markets, complemented with recovering oil/gas and some strength in utilities, are putting some wind back into Manitex’s (MNTX) sails, and the company is complementing this end-market recovery with improved cost efficiency performance. While orders slowed in the second quarter, that’s normal on a seasonal basis and I don’t think much is changing in terms of end-market opportunities for the company (in other words, I don’t believe the second quarter order flow indicates that the window is closing).

Manitex shares don’t look particularly undervalued to me right now, even with a double-digit decline from its 52-week high. I believe there are still legitimate opportunities to grow the PM knuckle-boom crane business in the U.S. over the coming years and I think the Tadano relationship offers some upside in terms of product development, joint sourcing, and expanded market access in Asia, but that’s a multiyear opportunity that won’t even really start until next year. Even so, the share price seems to reflect a fair bit of that now.

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Manitex Continues To Benefit From Market Recovery And Self-Improvement

Glimpses Of Progress At Manitex

Small-cap crane manufacturer Manitex (MNTX) has become a much harder company to follow recently. Not only is this company barely followed by the Street, the company’s need to restate earnings for 2016 and 2017 means there’s not much reliable information to go on in terms of recent historical numbers.

The good news is that what information management has provided is broadly positive. Revenue is rebounding, the backlog is growing, and margins seem to be more or less where I thought they’d be. Predicting how far this recovery can take the energy and construction businesses is difficult, and the company is also doing a pretty good job of building out its PM Group business in the U.S. All told, I think today’s stock price is pretty fair and offers double-digit expected returns for a business that still has elevated operating risk.

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Glimpses Of Progress At Manitex

Seeking Alpha: Diworsification Messing Up Middleby's Growth

Among the many nuggets to be found in Peter Lynch's books, the concept of "diworsification" is one of my favorites. The term refers to companies that eventually expand or acquire beyond their core competencies and end up ruining their business in the process. With Middleby's (NASDAQ:MIDD) struggles in its Viking business leading to real pressure on growth and margins, it's fair to ask whether this company's foray into residential cooking equipment is destroying the value created by the strong commercial operations.

These shares have lost about a quarter of their value since I last wrote about them, as a slowdown in food processing sales and the mess in the residential business has led to disappointing quarters (including organic revenue contraction in the second quarter), downward revisions, and a re-examination of whether these shares still merit such a robust premium. I've cut back my growth expectations, but I believe Middleby is still well-placed to take advantage of growing demand for labor-saving automation in commercial kitchens. There's elevated risk right now, and I'd be nervous about buying ahead of fourth quarter earnings, but there's still above-average growth potential in the core business.

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Diworsification Messing Up Middleby's Growth

Seeking Alpha: Manitex Struggling As The Boom Cycle Goes Bust

It's cold comfort when one of the nicest things you can say about a long call is that the company's peers have gotten hammered about the same in the intervening time. Manitex (NASDAQ:MNTX) borrowed extensively to fund an M&A program that has taken the company from around $100 million a year in revenue in 2010 to almost $100 million a quarter now, but the severe downturn in the energy market has hammered this company and pushed operating margins back into the low single digits. Although I think Manitex could still pay its interest even with a 10% sales decline next year and negative gross margin leverage, the situation is far from ideal today.

This is not just a Manitex-specific problem. Manitowoc (NYSE:MTW) is down about as much since the last time I wrote about Manitex, and Terex (NYSE:TEX) has done worse. Europe's Manitou (OTC:MAOIF), which is largely screened from the energy-related downturn in the U.S., hasn't done much better either.

At the risk of not knowing when to quit, I think Manitex still has a worthwhile future. The company's acquisition of PM Group gives the company better exposure to what should be an improving European construction sector in 2016, not to mention exposure to growth in North America (where PM Group has been historically under-represented). I think it's early (or at least very aggressive) to expect an energy recovery, but PM Group and ASV do at least give Manitex more leveraging to a healthier construction sector in North America.

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Manitex Struggling As The Boom Cycle Goes Bust

Seeking Alpha: Middleby Demands A Stiff Price For Growth

Investors will almost always pay up for growth. If you don't understand that, you'll never understand the trading in Middleby (NASDAQ:MIDD) shares, nor large swaths of the market. This doesn't mean that investors are always rational about what they'll pay for growth (if you remember the tech bubble, you know what I mean), and there are plenty of flame-out stories of stocks that carried steep multiples for five or more years, only to double back down to reality. But the bottom line is that growth draws investors like moths to flames.

I still like this company quite a bit, and I believe there are still significant growth/expansion opportunities in commercial foodservice (especially on the cold side), food processing, and residential (on the cold side and outdoor cooking). That said, while I don't think the valuation is crazy and I do think that the company can continue to double the growth of the underlying market, there's just not much breathing room left in the valuation from my perspective.

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Middleby Demands A Stiff Price For Growth

Seeking Alpha: Manitex Has Expanded Into The Downturn, But Can It Deliver?

What Manitex (NASDAQ:MNTX) has done is bold - in ten year's time the company will either be a well-diversified material handling company that is a thorn in the side of companies like Terex (NYSE:TEX) and Manitowoc (NYSE:MTW) or it will be a lesson on the risks of overly ambitious growth plans and aggressive use of leverage.

I've placed my own bet on the former outcome, and I do believe Manitex can drive double-digit revenue growth and build toward double-digit operating margins. Growth should come from share gains in larger cranes, exposure to a construction recovery, and a host of share-growth opportunities in areas like container handling and industrial cranes. It is likely going to take at least a few quarters for underlying demand to improve and there are risks that the costs of operating this expanded global enterprise will run higher than expected, but I continue to believe that Manitex can support a low-to-mid double-digit fair value.

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Manitex Has Expanded Into The Downturn, But Can It Deliver?

Seeking Alpha: Growth Still The Heart Of Middleby's Story

For an investor who sees himself as more value-oriented than growth-oriented, Middleby (NASDAQ:MIDD) is always challenging and frustrating. Built largely through acquisitions, the company has nevertheless posted revenue growth in the vicinity of 20% a year (annualized) over the past decade, with a doubling of FCF margins supporting even better FCF growth. What's more, it arguably doesn't get enough credit for growing and improving those assets it acquires.

Middleby remains a stretch from a DCF valuation perspective, or at least unless you're willing to assume double-digit revenue growth and FCF productivity well above the norms of the industry. That said, the price isn't so unreasonable from an EV/EBITDA standpoint, and the company is working on commercializing several concepts with significant revenue and margin potential.

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Growth Still The Heart Of Middleby's Story

Seeking Alpha: Is Now The Time For Essex Rental?

The past year has been a pretty good one for the shares of at least some companies leveraged to commercial construction activity. The crane companies (Terex (NYSE:TEX), Manitowoc (NYSE:MTW), and Manitex (NASDAQ:MNTX)) had a rough time in the wake of second quarter results, they're up 27% to 42% over the past year. United Rentals (NYSE:URI) and Hertz (NYSE:HTZ), both of which rent various types of equipment to the construction industry, have also joined in, climbing over 100% and almost 20%, respectively.

Then there is Essex Rental (NASDAQ:ESSX). One of the largest owners and renters of crawler cranes in the United States, these shares are down almost 40% as the company continues to languish with weak utilization of traditional crawlers and uninspiring revenue and EBITDA performance. It seems to be getting better, though, as the company is implementing a new customer-centric strategy, expanding some of its offerings, and seeing improving utilization and order inquiries. Add in pretty positive recent trends in non-residential construction indexes and maybe this marks a potential turnaround point.

Before going further into the details, it is important to note that Essex is tiny (a sub-$100 million market cap) and not very liquid (an average volume of less than 50K shares/day). That increases the risk and makes it less likely that Essex Rental will gain the attention and support of sell-side analysts.

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Is Now The Time For Essex Rental?

Seeking Alpha: Manitex Misses, But May Be Building Momentum

With Terex (NYSE:TEX) and Manitowoc (NYSE:MTW) both disappointing the Street this quarter, and showing weak results from their crane businesses, the writing was on the wall for Manitex (NASDAQ:MNTX) and the company did miss all the way down its income statement. The bright side is that Manitex seems to be doing better on a relative basis and may well be gaining share in North America. Increased light construction and energy activity could help results in the second half, and management remains committed to building a larger growth-oriented enterprise in engineered lifting. Manitex continues to look undervalued, and while it is a riskier play on improving crane demand with those extra risks could come extra rewards.

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Manitex Misses, But May Be Building Momentum

Seeking Alpha: A High Multiple And Weak Performance Slam Manitowoc

I was concerned about Manitowoc's (NYSE:MTW) valuation last quarter, as well as the inconsistent outlook from Manitowoc and Terex (NYSE:TEX) regarding their crane businesses. Now, with another quarter and lowered guidance in the books, it looks like 2014 isn't going to be the year that investors hoped it would be. I do have some concerns regarding competitive inroads from the likes of Tadano (6395.JP) and even with this big pullback on Thursday, Manitowoc shares don't exactly look cheap. Undervalued machinery names are pretty rare these days, though, and Manitowoc has a restructuring/spin-off angle so there could be some potential later in the year as investors start looking to 2015, but I'd be a little more careful around the shares today.

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A High Multiple And Weak Performance Slam Manitowoc

Seeking Alpha: Manitex Takes A Small Step Back In A Tough Quarter

If the crane businesses of Terex (TEX) and Manitowoc (MTW) had a severe case of the sniffles this quarter, it stands to reason that Manitex (MNTX) would catch cold as well. The good news is that Manitex showed cost discipline and orders seem to be recovering nicely. There's not a lot of obvious value left in these shares, though, so more value-oriented investors may not find as much to like right now.

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Manitex Takes A Small Step Back In A Tough Quarter

Seeking Alpha: Middleby Continues To Defy Gravity

It says something about Middleby's (MIDD) valuation that a 20% pullback from its recent 52-week high still has the shares trading at around 15 times forward EBITDA. Then again, this is a company that continues to post organic revenue growth and profit growth well in excess of its industry peers while still looking at a large, mostly unpenetrated global market. While I can't really get all that comfortable with the valuation here, the operational story continues to be one of continued performance.

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Middleby Continues To Defy Gravity

Seeking Alpha: A Slower Recovery Threatens Manitowoc's Ambitious Multiple

Investors have been waiting for the boom/bust crane cycle to fuel another upswing in Manitowoc's (MTW) results, but the actual recovery in construction and infrastructure activity has proven slower and less stable than hoped. Management remains confident that the outlook for 2014 hasn't changed all that much, but investors clearly voted with their feet as the weak first quarter results sent the shares down 10% on Friday. Even after the decline, Manitowoc isn't all that cheap but it does remain a leveraged play on that recovery in construction and construction equipment spending.

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A Slower Recovery Threatens Manitowoc's Ambitious Multiple

Seeking Alpha: Manitex In Good Shape For A Slow 2014 Recovery

Investors definitely want to believe that the crane market is on its way to recovery, as both Terex (TEX) and Manitowoc (MTW) are near 52-week highs. Clearly, there is more to these businesses than cranes, but a quick perusal of sell-side research shows that's where there is the most optimism. All of that should be good for Manitex (MNTX), a smaller, faster-growing crane player with more of a niche focus.

Manitex really could use a sustained recovery in the U.S. land drilling market, and better conditions in the housing and commercial construction markets wouldn't go unappreciated either. Even so, I think the company deserves credit for outgrowing its markets and showing solid margin improvements, even while integrating acquisitions. Given the slightly better margins and FCF generation, as well as sliding the 10-year DCF model out a year, I'm modestly increasing my fair value estimate and I still think Manitex is a good small-cap growth/GARP story.

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Manitex In Good Shape For A Slow 2014 Recovery

Seeking Alpha: Okay Results From Terex Don't Fit Wall Street's Story

Wall Street seems to really want to believe that 2014 will be a very good year for companies exposed to non-residential construction, even though comments from company managements don't seem quite as optimistic. That is coming home to roost for Terex (TEX) on Wednesday, as the shares are getting hit relatively hard on what didn't really look like a bad quarter or guide.

I like Terex's focus on improving margins and full-cycle, and I also like the company's leverage to an improving European economy. Valuation is a more complicated matter. While I think Terex can ride a recovery in non-residential construction to high single-digit FCF margins over the next five years, I don't see the shares as cheap on a long-term intrinsic value basis. On the other hand, cyclical stocks tend to overshoot during recoveries and investors can look at metrics like EV/EBTIDA as validation for further upside in these shares.

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Okay Results From Terex Don't Fit Wall Street's Story

Seeking Alpha: Can Manitowoc Live Up To More Bullish Crane Expectations?

Amidst the still-shaky non-residential construction recovery, investors have cast strong votes in favor of incoming prosperity for Manitowoc (MTW). This crane and foodservice company is certainly among those to benefit if construction equipment orders improve, and such improvement is likely more "when" than "if", but the volatility of that "when" could still make for some interesting times in the stock.

Speaking of the stock, I think an investor's time horizon and dedication to intrinsic value are both pretty relevant here. Unless you think Manitowoc can transform itself into one of the best-run, most-profitable heavy equipment companies over the next decade, discounted cash flow just doesn't suggest much value here. On the other hand, if you believe that a recovery in construction demand will fuel double-digit EBITDA growth over the next three to five years and that that growth merits a double-digit multiple to 2014's EBITDA, there's still upside left in these shares.

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Can Manitowoc Live Up To More Bullish Crane Expectations?

Seeking Alpha: Middleby Has Lots Of "Guh", Not So Much "Arp"

Institutional investors have a knack for taking a page out of Wile E. Coyote's book when it comes to growth stocks - chasing them right off the edge of the cliff and into valuations based on thin air. This is in no sense meant as an indictment of the quality food equipment manufacturer Middleby (MIDD), as I believe this company is highly innovative and has numerous opportunities to grow its business over the next decade. At some point, though, even GARP investors have to acknowledge that this stock is trading a great deal more on the "Guh" part of the story than "a reasonable price".

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Middleby Has Lots Of "Guh", Not So Much "Arp"

Seeking Alpha: Manitex Wobbles A Bit, But Still A Share-Gaining Industrial Growth Story

Even a share-gaining growth story can run ahead of its end markets for only so long. Sluggish markets like energy and construction finally caught up to Manitex (MNTX) in the third quarter, as the company posted its weakest revenue growth number in quite some time. Even so, the company continues to do pretty well relative to large rivals like Terex (TEX) and Manitowoc (MTW), and the upcoming introduction of a 70-ton crane, as well as on the ongoing improvement in the CVS container-handling business, should bolster results in the coming years.

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Manitex Wobbles A Bit, But Still A Share-Gaining Industrial Growth Story

Seeking Alpha: Middleby Not Giving Many 'Buy The Dip' Opportunities

When an investor is watching a great growth story from the wrong side of the glass, there's little to do but hope for the occasional stumble to create a buying opportunity. Fast-growing food service equipment company Middleby (MIDD) stubbornly refuses to cooperate, though, as management's consistent execution has created relatively few pullbacks in recent times. Given the company's dual focus on strong internal product development and strategic M&A, not to mention the large addressable markets left unexplored (both geographically and product-oriented), it's tempting to make a "forget the valuation" call with Middleby. At a minimum, this is a stock to monitor just in case one of those rare pullbacks comes.

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Middleby Not Giving Many 'Buy The Dip' Opportunities

Investopedia: Sysco's Benefit Of The Doubt Looking A Little Fuzzy

Like a bag of produce left in the back of the fridge too long, the argument for Sysco (NYSE:SYY) being a dependable year-in/year-out performer is looking fuzzy and pretty unappetizing. I don't argue that Sysco remains the go-to name when it comes to supplying restaurants and all manner of food-serving institutions, but I do argue that that dominance isn't worth quite as much in terms of margin leverage as long believed. Still, this company reliably churns out free cash flow and that ought to keep the shares from getting all that cheap.

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