The Rebound At Terex Should Have Legs

While the 2023 outlook for many industries is getting more frightful, the recent trading in Terex (NYSE:TEX) and other heavy machinery names has been pretty delightful, with Terex up more than 65% from its summer lows and leading in trailing 6-month performance over other machinery names like Caterpillar (CAT) (up 15%), Deere (DE) (up 36%), Metso (OTCPK:OUKPY) (up 18%), and Oshkosh (OSK) (up 2%).

Relative to many other industrials, demand for equipment used in markets like aggregates, agricultural, environmental (recycling, et al.), forestry, mining, and so on should hold up better, particularly given strong backlogs to start the year. While I do see some risks around private non-residential construction, overall, I think Terex is well-placed, and I don't think the stock is necessarily played out yet.

 

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The Rebound At Terex Should Have Legs

Manitex Waiting For The Tide To Change

Credit where due, Manitex (NASDAQ:MNTX) management is doing what it can to shore up the business during a tough cyclical downturn in its core businesses. In addition to cutting costs, management has been selling non-core businesses in an attempt to reduce the company's leverage and give it a little more breathing room while awaiting a turnaround in its key energy market and the benefit of efforts to grow the ASV and PM businesses.

Unlike so many other industrial names, Manitex didn't really see a post-election bounce (the bounce Manitex saw last week was due to more encouraging guidance for its crane business). Manitex isn't as leveraged to potential infrastructure spending increases as Terex (NYSE:TEX) or Manitowoc (NYSE:MTW), but it can still be argued that the shares don't reflect the possibility of a turnaround here.

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Manitex Waiting For The Tide To Change

Columbus McKinnon Poised For An Industrial Recovery, But So Is The Street

This may be obvious to many readers and investors, but timing is an invaluable part of the investment process. A couple of months ago, Columbus McKinnon (NASDAQ:CMCO) would have looked like a significantly undervalued and overlooked play on a general industrial recovery, not so much an underappreciated leader in the material handling market with a catalyst from increasing automation.

Fiscal second quarter earnings were quite encouraging regarding that recovery, though, and the recent Presidential election only strengthened investor conviction, taking these shares up almost 60% since the day before second quarter earnings. I do believe that recovery will come, though, and the recently-announced deal for Konecranes' (OTCPK:KNCRY) STAHL business should benefit revenue, margins, and cash flow in the years to come.

With an underlying expectation of mid single-digit revenue growth and high single-digit cash flow growth supporting a fair value of about $28, Columbus McKinnon still has some appeal, but it would definitely be a name to watch for a pullback if this rally hits the rocks.

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Columbus McKinnon Poised For An Industrial Recovery, But So Is The Street

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

Seeking Alpha: Oshkosh In A Value/Value Trap Puzzle

Oshkosh (NYSE:OSK) is a frustrating company/stock for me in many respects. The valuation on the shares and the potential of a better-run business keeps it on my watch list, but I continue to be concerned about what I see as an overlooked erosion in the company's core Access Equipment business. Winning the JLTV contract should bring in a long run of profits and cash flow, but the benefits won't kick in for a while.

Oshkosh remains what it has long been to me - a potentially undervalued stock attached to an underperforming company. I can see how Oshkosh shares should trade above $40, but I simply don't have confidence in the business at this point and I have real questions about the prospects for long-term valuation creation.

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Oshkosh In A Value/Value Trap Puzzle

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: Oshkosh Getting Squashed

I was nervous about Oshkosh (NYSE:OSK) back in January, as I thought there wasn't enough upside in my base-case assumptions to offset the significant risk and uncertainty. As it turns out, construction and energy demand have been even weaker than expected at the start of the year, and there are signs and warnings from companies like Eaton (NYSE:ETN) and Parker-Hannifin (NYSE:PH) that overall mobile equipment demand is not looking very good.

Down almost 20% from the time of that January piece, the investment case for Oshkosh is still broadly what it was before - buy Oshkosh if you expect a sharper recovery in oil/gas and solid growth in construction equipment demand, coupled with Oshkosh winning a major defense vehicle award. While my fair value hasn't gone down too much (I had generally more bearish than average expectations earlier this year), I still have elevated concerns about this business and I think there are safer risk/reward trade-offs out there. All of that said, there's definitely room for self-improvement here and a defense vehicle win could conceivably add as much as $10 per share.


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Oshkosh Getting Squashed

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: Little Clarity, But Ample Concerns, With Oshkosh

Investors in the industrial/machinery sector have quite a lot to mull over these days. The steep drop in energy prices has undermined the growth plans of many companies, while the persistently sluggish recovery in construction has taken its own toll. Add in concerns about Europe and China and it's not a terribly comforting picture.

In the case of Oshkosh (NYSE:OSK) it's arguably worse from an uncertainty standpoint. Oshkosh is logging good orders in access, but utilization rates aren't great and the ABI hasn't broken out. Add in the potentially enormous, but very uncertain, award for the JLTV vehicle contract and you can generate a wide spread between the bull and bear scenarios. I'm not a big fan of win-big/lose-big investment scenarios unless I've very confident that the conditions support the "win-big" side, and so it is hard for me to get enough comfort with Oshkosh to put my own money into these shares.

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Little Clarity, But Ample Concerns, With Oshkosh

Seeking Alpha: Is It Time To Start Thinking Recovery For Komatsu?

The outlook for the construction and mining industries hasn't gotten much better, and with that both Caterpillar (NYSE:CAT) and Komatsu (OTCPK:KMTUY) have posted pretty uninspiring performances. While the environment for mining equipment is still under pressure from weak prices and shrinking capex budgets, and the construction market in key Komatsu markets like China and Japan is hardly great, Komatsu is investing in long-term innovation, maintaining a focus on margins, and positioning itself for the eventual recovery.

Since my last piece on Komtasu, these shares have outperformed Caterpillar, Joy Global (NYSE:JOY) and Terex (NYSE:TEX) by a pretty healthy margin. Although Komatsu isn't particularly well-positioned for a construction recovery in North America (or Europe), a turnaround in the emerging markets would be a different story. I don't think investors need to rush to buy this stock, but the valuation isn't too bad and I think the company's emphasis on its more lucrative parts/service operations and long-term innovation could pay dividends down the road.

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Is It Time To Start Thinking Recovery For Komatsu?

Seeking Alpha: Manitex Still Hopes To Grow Past The Crane Wreck

It's been a rough year for Manitex (NASDAQ:MNTX), as the hoped-for turnaround in crane demand failed to materialize. For what little it may comfort investors, Manitex hasn't fared much worse from a stock market perspective as Terex (NYSE:TEX), Manitowoc (NYSE:MTW), and Palfinger (OTCPK:PLFRY) have all been weak as well.

There are certainly still clouds on the horizon, as rental fleets likely do not need to refresh aging fleets on a one-to-one basis and housing/infrastructure spending hasn't caught fire. Even more concerning to Manitex, oil and gas spending is likely to drop meaningfully next year as energy companies respond to a sudden drop in oil prices that has pushed many drilling projects below breakeven.

Amidst the challenges, Manitex has continued to build its business toward a critical mass in specialty equipment and 2015 could see the company break out over $500 million in revenue. Pushing out my expectations for organic growth and margin improvement has dropped my fair value in the low-to-mid teens and the debt magnifies the risk, but Manitex is still targeting growth in recovering sectors like infrastructure and industrial capex.

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Manitex Still Hopes To Grow Past The Crane Wreck

Seeking Alpha: Allison Transmission Still Looking At A Multiyear Sales Effort Outside The U.S.

Orders continue to roll in pretty nicely for large commercial trucks, but major suppliers like Cummins (NYSE:CMI), Tenneco (NYSE:TEN), and Allison (NYSE:ALSN) haven't really been showing it in their share prices. Whether it is concerns about weak conditions in Latin America or valuations that got a little overheated earlier in the year, these shares haven't done much since I last wrote about Allison in March.

I thought back in March that valuation might be getting a little stretched, but with this stretch of relative underperformance, I'm getting more positive on Allison. The company will likely see some headwinds created by Ford (NYSE:F) and Volvo (OTCPK:VOLVY), but I like the company's opportunity to leverage its new TC-10 transmission into greater metro Class 8 share. Longer term, the key question remains whether or not the company can coax companies in Europe, Latin America, and Asia to adopt automatic transmissions despite the greater success. I think the process will take some time, but in the meantime Allison offers attractive margins and cash flow leverage, though the valuation is still not an obvious "gimme".

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Allison Transmission Still Looking At A Multiyear Sales Effort Outside The U.S.

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: Komatsu's Relative Performance Gap May Not Be Unfair

To start with, I think Komatsu (OTCPK:KMTUY) is one of the better-run heavy machinery companies in the world, and I think the company's strategy to differentiate itself with technological innovation (particularly in automation) is a very good move. That said, the stock has notably lagged Caterpillar (CAT), Joy Global (JOY), Terex (TEX), and Atlas Copco (OTCPK:ATLKY) over the past year, and I don't necessarily think that Komatsu is a great catch-up trade today.

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Komatsu's Relative Performance Gap May Not Be Unfair

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: 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: Oshkosh Leveraged To A U.S. Construction Recovery

Not much has changed in the past quarter for Oshkosh (OSK) and that's not necessarily a bad thing. The company's aerial work platform business is recovering, but Oshkosh and Terex (TEX) are still waiting on rental companies in North America to renew their fleets. The potential for activist-prompted moves is still here, and it increasingly sounds as though management is considering an acquisition. Oshkosh still looks undervalued on the basis of construction and commercial vehicle prospects, with defense offering a highly binary outcome later next year, but delays in a U.S. construction recovery remain as a meaningful risk factor.

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Oshkosh Leveraged To A U.S. Construction Recovery

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