Manitex Does Well On Margins, But Orders Bear Watching

In a generally still-healthy construction market, Manitex (MNTX) seems to be doing okay. The first quarter was maybe not quite as robust as some investors may wish to see on the revenue and order lines, but the margin progress was encouraging, and the overall environment for construction-related machinery still seems fairly healthy in North America. A key challenge, and opportunity, for Manitex management remains in the acceleration of the PM knuckle boom crane business, a machinery category that is relatively under-utilized in North America relative to Europe.

Manitex’s better-than-expected gross margin was nice to see, but orders were softer than I’d like. Still, even on the assumption of long-term FCF margins averaging out in the mid-single-digits, the shares look undervalued today.

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Manitex Does Well On Margins, But Orders Bear Watching

There's More Upside To Manitex As The North American Crane Market Recovers

The market for cranes in North America seems to be coming back nicely after a difficult trough cycle brought on by the sudden downturn in the energy sector, but Manitex (MNTX) have flattened out some - while the stock is up a healthy 50%-plus over the past year, it's basically flat since the time of my last write-up on the company. In that time, Manitex reported restated financials and continued to see good demand and order growth in its core crane operations.

Manitex shares still look somewhat undervalued on discounted cash flow and potentially more exciting on EV/EBITDA, particularly as EBITDA should ramp up significantly over the next couple of years. Investors shouldn't lose sight of the risks, including an earlier peak to crane demand and rising input costs, but Manitex is an interesting under-followed machinery recovery story.

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There's More Upside To Manitex As The North American Crane Market Recovers

Seeking Alpha: Manitex Prioritizing The Right Things During The Downturn

I think it is fair to say that Manitex (NASDAQ:MNTX) was too ambitious and too aggressive when breakneck North American onshore energy expansion fueled an unsustainable demand for cranes. Management significant stretched the balance sheet in the interests of empire-building, expanding into non-core areas like trailers and liquid storage tanks. When the cycle turned, Manitex found itself with a lot of debt, not a lot demand, and questionable synergies between the units.

All of that can certainly explain why the stock has been hammered worse than other lifting equipment companies like Terex (NYSE:TEX), Manitowoc (NYSE:MTW), Manitou, and Palfinger since 2014, but it doesn't necessarily make the shares untouchable now for aggressive investors. Management has pivoted from a growth-by-acquisition model to more of a value-creation model, with a stronger focus now on cost control/reduction, cash flow generation, and sustainable growth in high-potential businesses like knuckle cranes and the ASV product line.

I'm not as bullish on a meaningful rebound in the North American energy market as I once was, but I don't think it will much worse and I think construction (residential, commercial, and civil) can be a driver for this business. I don't see Manitex struggling to pay its interest, and I do believe further debt reduction efforts can unlock some value. My current estimates call for long-term revenue growth in the mid single-digits and peak FCF margins in the mid-to-high single-digits, supporting a fair value of $7.50 that could go higher if/when energy really recovers and/or management shows that it can build its knuckle crane and ASV operations into disruptive players.

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Manitex Prioritizing The Right Things During The Downturn