Earnings call transcript: Manitowoc Q4 2024 results show mixed signals

Manitowoc Company Inc. (NYSE:MTW), with a market capitalization of $419 million, reported its fourth-quarter 2024 earnings, revealing a mixed performance with an EPS of $0.10, falling short of the anticipated $0.13. Despite this, the company’s stock surged by 21.44% in post-earnings trading, closing at $11.86. The revenue for the quarter stood at $596 million, closely aligning with expectations but unchanged year-over-year. According to InvestingPro analysis, the stock appears overvalued at current levels, with several challenges ahead including significant debt burden and cash flow concerns.

Key Takeaways

• Manitowoc’s stock rose significantly despite an EPS miss, reflecting investor optimism.
• The company reported record non-new machine sales, a key growth area.
• Strategic initiatives such as the "Cranes plus 50" strategy are gaining traction.
• Market conditions remain challenging in Asia, particularly China.

Company Performance

Manitowoc’s overall performance in 2024 was marked by a 2% decline in full-year sales, totaling $2.2 billion. Adjusted EBITDA also saw a substantial decrease of 27% year-over-year, reaching $128 million. The company achieved record sales in its non-new machine segment, which has grown by 67% since 2020, highlighting a strategic shift towards less cyclical, higher-margin products. InvestingPro data reveals a concerning total debt to capital ratio of 0.6, though the company maintains a healthy current ratio of 2.02, indicating sufficient liquidity to meet short-term obligations. For deeper insights into Manitowoc’s financial health and 8 additional ProTips, consider exploring InvestingPro’s comprehensive analysis tools.

Financial Highlights

• Revenue: $596 million (flat year-over-year)
• Earnings per share: $0.10 (missed forecast of $0.13)
• Adjusted EBITDA: $128 million (-27% year-over-year)
• Free Cash Flow: $4 million for the year

Earnings vs. Forecast

Manitowoc reported an EPS of $0.10, missing the forecasted $0.13 by $0.03. This miss, while minor, reflects ongoing challenges in profitability. Revenue closely matched expectations at $596 million, though it remained flat compared to the previous year.

Market Reaction

Despite missing EPS expectations, Manitowoc’s stock experienced a significant increase of 21.44% in post-earnings trading. This surge suggests that investors are optimistic about the company’s strategic direction and operational improvements, such as the expansion of service locations and the introduction of new crane models.

Outlook & Guidance

Looking ahead to 2025, Manitowoc has set a net sales guidance range of $2.175 to $2.275 billion and expects adjusted EBITDA between $120 and $145 million. The company anticipates a lighter first quarter, reflecting typical seasonal patterns and current market conditions. InvestingPro analysis indicates that 2 analysts have recently revised their earnings downwards for the upcoming period, with the EPS forecast for FY2025 standing at $0.41. Discover more detailed forecasts and analyst recommendations, along with our exclusive Pro Research Report covering Manitowoc and 1,400+ other US stocks, available on InvestingPro.

Executive Commentary

CEO Aaron Ravenscroft emphasized the company’s strategic focus, stating, "We continue to transform Manitowoc through the execution of our Cranes plus 50 strategy." CFO Brian Regan added, "While uncertainty persists, there are some positive indicators," highlighting cautious optimism moving forward.

Risks and Challenges

• Continued competitive pressures from Chinese manufacturers.
• Market volatility in Asia, particularly in China and South Korea.
• Potential macroeconomic pressures affecting global demand.
• Supply chain disruptions impacting production schedules.

Q&A

During the earnings call, analysts inquired about regional sales expectations and the stability of used crane market values. The management addressed these concerns, emphasizing stable market conditions and strategic growth initiatives.

Overall, Manitowoc’s Q4 2024 results present a complex picture of missed earnings expectations but a positive market reaction, driven by strategic initiatives and operational improvements.

Full transcript - Manitowoc Company Inc (MTW) Q4 2024:

Conference Operator: Good day, and welcome to the Manitowoc Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ion Warner, Senior Vice President of Marketing and Investor Relations.

Please go ahead.

Ion Warner, Senior Vice President of Marketing and Investor Relations, Manitowoc: Good morning, everyone, and welcome to our earnings call to review the company’s fourth quarter and full year twenty twenty four financial performance and business update as outlined in last evening’s press release. Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer and Brian Regan, Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation on the Investor Relations section on our website, benetowoc.com, which you can use to follow along with our prepared remarks. Please turn to Slide two. Before we start, please note our Safe Harbor statement in the material provided for this call.

During today’s call, forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company’s current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors among others described in the company’s latest SEC filings. The Manitowoc Company does not undertake any obligation to update or revise any forward looking statement whether the result of new information, future events or other circumstances. And with that, I’ll now turn the call over to Aaron.

Aaron Ravenscroft, President and Chief Executive Officer, Manitowoc: Thank you, Ion, and good morning, everyone. Please turn to Slide three. In the wise words of Winston Churchill, a customer sees the difficulty in every opportunity an optimist sees the opportunity in every difficulty. As you can draw from our financial results, we faced plenty of difficulties during 2024. I’m proud to say that the Manitowoc team pursued every potential opportunity with great enthusiasm and optimism.

It’s inspiring to see the level of motivation and passion throughout the company. For example, during the year, we set a new record with $629,000,000 in non new machine sales. We grew our field service technician count by 7% to over four sixty team members. We launched 13 new cranes including the next generation EV self erecting tower crane and the MCT 2,205, which is the largest tower crane that we’ve designed and built out of our China operations. And we renegotiated our debt to improve our liquidity and extend our tenure.

I’d like to express my sincerest gratitude to the Manitowoc team for a hard fought 2024. For the full year, we reported $2,200,000,000 in sales and $128,000,000 in adjusted EBITDA. We generated $100,000,000 of free cash flow during the fourth quarter and ended the year with $321,000,000 in liquidity. Please turn to Slide four. Turning our focus to the Manitowoc Way, I am extremely proud of the team’s achievements.

First and foremost, in terms of safety, we ended the year with an RIR or recordable incident rate of 1.19. This is the second best result in the company’s history following a phenomenal year in 2023. In addition, we reduced our first aid incidents 25% year over year and saw a significant reduction in the severity of our lost time injuries. Twenty twenty four was arguably the safest year in our one hundred and twenty year history. Nevertheless, our gold still remains zero injuries and the team continues to find ways to improve.

We also continue to forge ahead with our environmental related Kaizens. In addition to the benefits to the planet, these initiatives have been pretty darn good for our pocketbook. During the year, we reduced our greenhouse gas intensity 6%, which equates to roughly $100,000 in savings. Since 2019, when we set our baseline for this metric, we’ve reduced our intensity by 36%. Lastly, I’d like to recognize our maintenance team in Portugal, who won our annual Manitowoc Way Lesson Learn award.

Thanks to their ingenuity, the team built an automated tester for welding torches that only cost Previously, we fixed upon failure, which could cause serious quality problems and significant loss of time. In addition to this invention, over the past two years, the team has done an excellent job integrating different IoT tools to track TPMs on our machine centers, modifying our paint booths to reduce our emissions and gas consumption and applying 5S to our maintenance area of the plant. Obrigado to the team and congratulations. Please move to Slide five. Turning our attention to the market, we generated orders of $516,000,000 during the fourth quarter.

Our backlog ended the year at $650,000,000 Regionally, The Americas rebounded in the fourth quarter following the U. S. Election. Customer sentiment has significantly improved post election. Dealer inventory levels remain reasonable.

Utilization rates at crane operators have been strong and rental rates have held steady. There’s optimism about the future demand. In Europe, the situation remains complicated, but there are a few positive indicators that suggest the European tower crane market is gradually recovering. For the second quarter in a row, our orders for tower cranes grew modestly year over year. While the French market remains weak, this has been offset by growth in Germany, Italy and The UK.

In Italy, a new incentive plan called Transione five point zero has recently announced. And of course, we are keen to see the impact of the upcoming German elections. Regarding France, I visited our two largest dealers and four major construction companies in December. Overall sentiment has yet to improve. All said, uncertainty still exists, but I am hopeful that there is some recovery in 2025.

For EU mobiles, in spite of the difficult economic environment in the region, demand for all terrain cranes has been relatively stable. We continue to benefit from recent product introductions and our significant improvements in quality and service. As a reminder, the Munich Bama event is just around the corner. We’re excited to showcase our new products as well as a variety of our new aftermarket offerings. The show is always a good barometer for how Europe will shape up over the next couple of years.

If you plan to attend the show, we’d be happy to host you. Turning to The Middle East, the overall market remains robust. Fourth quarter orders were up over 44% year over year. I visited the region in December and the situation remains the same in Saudi. While funding is tightening, numerous projects in The Kingdom (TADAWUL:4280) need to be completed to host the twenty twenty nine Asian Winter Games, the World Expo in 02/1930 and the World Cup in 02/1934.

To put this into perspective, a total of 780,000 hotel rooms will be needed for the World Cup alone. Three stadium projects have been awarded with another seven due to be granted. As for NEOM, one of these stadiums will be integrated into the line. Although it may take some time before the 170 kilometer vision for the line is completed, the airport project is already underway and the initial modules are in progress. The Asia Pacific market is a mixed bag.

There are no signs of construction recovery in China and overall competition with Chinese exporters has never been more intense. The biggest surprise during the quarter however came from South Korea. Due to the recent political upheaval, we had a couple of cancellations and a few hot deals that dried up worth roughly $8,000,000 in sales. Lastly, Australia continues to be steady. The mobile business continues to be stable and demand for tower cranes is gaining steam with new product deliveries and a robust aftermarket.

With that, I’ll pass it to Brian to walk you through the financials before I close with an update on our strategy.

Brian Regan, Executive Vice President and Chief Financial Officer, Manitowoc: Thanks, Aaron, and good morning, everyone. Please move to Slide six. Despite entering the fourth quarter with a lot of uncertainty around the U. S. Election, our results were generally in line with our expectations and the guidance previously provided.

To summarize, total revenue for the quarter was $596,000,000 and we achieved trailing twelve month non new machine sales of $629,000,000 a record high. Furthermore, we made significant improvements in reducing our inventory, generating $100,000,000 of free cash flows to bring our leverage back below our target of three times. We had customer payments that slid into 2025 impacting our ability to achieve the cash flow guidance. Specific to fourth quarter results, orders were $516,000,000 an increase of 8% from a year ago. Notably, European Tower Crane orders were up year over year for the second quarter in a row.

It is encouraging to see some early signs of a potential recovery. December 31 backlog was $650,000,000 a year over year decrease of 29%. Net sales in the fourth quarter were $596,000,000 flat versus a year ago. A year over year decrease in The Americas was offset by stronger non new machine sales. SG and A expenses were $77,000,000 which included a $1,000,000 charge related to a legal matter with the U.

S. Environmental Protection Agency. Excluding the impact of this charge, SG and A expenses as a percentage of sales were 13%, flat year over year. Our adjusted EBITDA for the fourth quarter was $35,000,000 a decrease of 4% year over year. Adjusted EBITDA margin was 5.9, a decrease of 20 basis points.

Our GAAP diluted income per share in the quarter was $1.59 On an adjusted basis, diluted income per share was $0.1 an increase of a penny from the prior year. Please turn to Slide seven. Looking at the full year, our twenty twenty four orders totaled $1,923,000,000 an 8% decrease year over year. Net sales for the full year were $2,178,000,000 a 2% decrease over the prior year. Our non new machine sales were $629,000,000 Reflecting back to 2020, the year prior to embarking on our Cranes plus 50 strategy, non new machine sales were $376,000,000 Since then, we have grown our non new machine sales by over $250,000,000 or 67%.

This reflects great progress in executing our strategy to grow the less cyclical higher margin aftermarket business. Adjusted EBITDA for the year was $128,000,000 a decrease of 27% year over year. Adjusted EBITDA margin decreased 200 basis points over the prior year to 5.9%, primarily due to product mix and under absorption of fixed costs. The year over year adjusted EBITDA headwind of the European Tower Crane business was $32,000,000 On a GAAP basis, our benefit for income taxes in the year was $44,000,000 This includes a non cash benefit of $56,000,000 related to the release of a valuation allowance. On an adjusted basis, our provision for income taxes was $12,000,000 This includes $4,000,000 or $0.1 per share of non operational discrete items, which were not considered in our guidance.

Our adjusted diluted earnings per share was $0.41 Turning to Slide eight, during the year, we generated $49,000,000 of cash flows from operations and had capital expenditures of $45,000,000 of which $5,000,000 was related to strategic rental fleet growth. This resulted in free cash flows of $4,000,000 and an ending cash balance of $48,000,000 The lower than guided free cash flows were the result of the timing of shipments at the end of the year, which resulted in a delay in cash collections to 2025. Net working capital as a percentage of sales at the end of the year was 21% flat compared to the prior year. Our build plan adjustments were effective in getting our net leverage to 2.66 times below our targeted three times. Total (EPA:TTEF) outstanding borrowings under the ABL increased $19,000,000 during the year with $79,000,000 outstanding at year end.

With the successful refinancing of our debt during the year and the related incremental availability under our ABL, total liquidity was a healthy $321,000,000 Please turn to Slide nine. As we look ahead to 2025, the one consistency is that uncertainty persists. For The U. S. Market, the positive sentiment we heard in May at our Crane Days event is coming back.

There are still questions as to what will happen to interest rates and the effect of any tariffs. While there is some optimism in Europe for the first time in a while, any improvement is expected to be slight. Asia continues to be a challenge and the competition in The Middle East remains fierce. As you can see on the slide, the midpoint of our 2025 guidance reflects a marginally better year with net sales of $2,175,000,000 to $2,275,000,000 adjusted EBITDA of $120,000,000 to $145,000,000 In addition, we expect to generate between $55,000,000 and $85,000,000 of operational free cash flows, excluding the impact of any potential impairment to settle the EPA matter. While we do not provide quarterly guidance, we do want to note that the first quarter of twenty twenty five is expected to be extremely light, more so than usual as a result of the build schedule reductions we made in 2024.

While historically, Q1 has provided approximately 20% to 25% of our full year adjusted EBITDA, this Q1 is expected to contribute approximately half that amount. With that, I will now turn the call back to Aaron.

Aaron Ravenscroft, President and Chief Executive Officer, Manitowoc: Thank you, Brian. Please turn to Slide 10. 20 20 four was definitely a challenging year. The European tower crane market reached what we believe is the bottom of its cycle. Chinese competition intensified globally compressing prices in emerging markets and The Americas experienced a significant slowdown leading up to the election.

Nevertheless, the team continued to push our strategy forward finding pockets of opportunity for growth. Even in the weak European tower crane market, we were able to grow our non new machine sales year over year. To stay ahead of the Chinese competition, we continued to introduce new tower cranes specifically designed for The Middle East projects. For mobile cranes, we continued to aggressively service our customers with field service support, remanufacturing and used cranes. And in The Americas, we continued to expand our service locations to support our Cranes plus 50 strategy.

In addition to upgrading our locations in Phoenix and Baton Rouge, we recently announced the acquisition of certain crane assets and territories in North Carolina, South Carolina and Georgia. We continue to transform Manitowoc through the execution of our Cranes plus 50 strategy. Just consider the progress that we made since 2020. First, non new machine sales in 2024 were $629,000,000 a 67% increase compared to 2020. Second, we increased our field service tech population to four sixty seven techs in 2024, an increase of over 100% since 2020.

Third, in The U. S, we added 16 service locations compared to just one location in 2020. In addition, we added service shops in Lima, Peru, Barnsley, UK and Meru, France. And fourth, gross profits from non new machine sales in 2024 were $2.00 $8,000,000 a 64% increase since 2020. Although we can’t control the ebbs and flows of the crane cycle Manitowoc has a strong reputation for managing it utilizing the Manitowoc way.

I’m convinced more than ever that our Cranes plus 50 strategy is the key to breaking this cycle’s grip on our business. As a reminder, non new machine sales are significantly less volatile than new crane market and have average gross profits of roughly 35%. Our goal is to consistently generate stable and substantial returns on our invested capital regardless of the Crane cycle. Crane’s Plus 50 provides us a blueprint to achieve this. With that operator, please open the line for questions.

Conference Operator: We will now begin the question and answer session. Our first question comes from Jerry Revich with Goldman Sachs. Please go ahead.

Brian Regan, Executive Vice President and Chief Financial Officer, Manitowoc: Good morning, Jerry. Hi, Jerry.

Clay, Analyst (Representing Jerry Revich), Goldman Sachs: Hey, you’ve got Clay on here for Jerry. Hi, Clay. Yes, to start off here, guidance implies sales up a little bit here at the midpoint. Can you just talk about where that embeds things staying the same or getting better just regionally? Can you talk a little bit about it on earlier?

Just curious where what guidance of beds on a regional basis?

Brian Regan, Executive Vice President and Chief Financial Officer, Manitowoc: Yes. I think it’s marginally better. I’d say year over year from a revenue standpoint. We’ve got a wide range because there’s a handful of possibilities that will happen during the year. But I mentioned that we expect Europe to be slightly better in particular on the tower crane side.

U. S. Slightly better, but Asia continues to be uncertain, in particular South Korea. So I’d say it’s a mixed bag, hence why we’ve got the large range in the guidance.

Clay, Analyst (Representing Jerry Revich), Goldman Sachs: Thanks. And separately on the non new machine sales, can you talk about how used values for cranes have trended throughout the quarter and now as we head into 2025? Thanks.

Aaron Ravenscroft, President and Chief Executive Officer, Manitowoc: Yes, I mean, in terms of values on used cranes, it always depends on the age and the model of the crane. So I mean, from my perspective, there’s not been much change. Of course, sometimes whenever you go through some of these surveys, you look at Ritchie Brothers numbers, usually those are cranes that are last resort. I mean, we’re typically doing the deals directly and those are cranes I think that have more interesting value or more interesting models to the marketplace. So from my perspective, used prices haven’t gone down or up.

Clay, Analyst (Representing Jerry Revich), Goldman Sachs: Thanks. I’ll pass it on.

Aaron Ravenscroft, President and Chief Executive Officer, Manitowoc: Thanks, Clay.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Ion Warner for any closing remarks.

Ion Warner, Senior Vice President of Marketing and Investor Relations, Manitowoc: Thank you. Please note that a replay of our fourth quarter twenty twenty four earnings call will be available later this morning by accessing the Investor Relations section of our website at manatowoc.com. Thank you everyone for joining us today and for your continuing interest in The Manitowoc Company. We look forward to speaking with you again next quarter.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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