Stifel Upgrades Manitowoc To Buy Following Meeting With CEO Pennypacker

Stifel’s Stanley S. Elliott mentioned that meeting Manitowoc Company Inc MTW's new CEO, Barry Pennypacker, at the Bauma Trade Show, increased confidence in the opportunities facing the company.

Elliot upgraded the rating on Manitowoc from Hold to Buy, with a price target of $6.

“We’ve always felt that Manitowoc had strong brand recognition and leading distribution and we expect this to become more apparent as operations improve,” the analyst said.

Cost Savings Targets

The CEO had announced plans in January to achieve cost savings of $35-$45 million, which represents about two percent of sales, over the next three years.

Elliot believes this target could prove conservative, given the “lean journey” of the legacy business.

In addition, the company has announced plans for further cost actions to right-size its business, including plant rationalization, headcount reduction and other initiatives. Although details were not provided, Elliot expects the savings to be significant, “likely catching investors by surprise.”

“We would anticipate a multi-year time horizon for benefits, but given the depressed nature of the crane cycle currently we believe the timing of the restructuring will prove opportune,” Elliot explained.

Operating Margin

Management also indicated it was working on achieving double digit operating margin, driven by a reduced global footprint.

Elliot believes that most of the cost would be structural, given that Manitowoc Company operates 49 manufacturing facilities at present, across 20 countries.

“While Manitowoc’s Product design has remained at the forefront of the industry, manufacturing capabilities and efficiency has lagged,” the analyst added.