Manitowoc Downgraded At Morgan Stanley, Stock May Be 'Spinning Its Wheels'

• The share price of Manitowoc Company Inc MTW has declined 33.89 percent year-to-date, touching a low of 14.57 on September 28.
• Morgan Stanley’s Nicole DeBlase has downgraded the rating on the company from Overweight to Equal-weight, while lowering the price target from $24 to $14.
• Although management it still committed to spinning-off of the Foodservices segment, DeBlase does not expect this move to enhance shareholder value and believes that there could be 7 percent downside risk to the stock.

According to the Morgan Stanley report, Manitowoc has negatively revised the guidance for its Crane segment for the third time in 12 months. Management explained that the latest revision was driven by “incremental weakness in the Middle East/Asia as well as execution challenges related to the VPC launch.”

Analyst Nicole DeBlase has therefore reduced the 2016 EBITDA estimate for the Crane segment by 40 percent to $121 million.

On the other hand, the Foodservices segment has once again delivered upside surprise in Q3. However, lower EBITDA expectations for the Crane segment suggests “higher post-spin Foodservice leverage.”

“The hypercyclicality of the Crane business means that its standalone balance sheet cannot support much debt,” DeBlase said, while explaining that this would mean that the Foodservice segment would need to assume about $1.4 billion in debt.

This makes Manitowoc “a less attractive consolidation candidate, limits its ability to grow via M&A, and argues for a lower post-spin multiple,” the report stated.