NEW YORK - Shares of Manitowoc (MTW) are up over 10% today in trading on the New York Stock Exchange with volume surging over 8 million shares. Terex Corporation colloquially known as the King due to its Latin translation is also up over 10% on the New York stock exchange on strong volume.
Manitowoc is known colloquially as man it's up a lot because of its high share price relative to its value. The company said yesterday it made net income of $15 million or 12 cents a share. Crane segment revenue grew 40% year over year and over 30% from the previous quarter however profits lagged. The food service segment marginally increased its profit over the year. However its results can be seen as disappointing. The food service segment is projected to make $118 of operating earnings next year after corporate expense allocation but only contribute half of MTW's expected $80 million of profit. MTW said yesterday it would make between $80 to $100 million of profit but probably less since their assumptions include them buying out $400 million of debt even though they have a very low amount of cash on their books and lackluster operating earnings.
The food service earnings are disappointing because the company purchased this for $2.7 billion and this $42 million includes some of the company's other previous food segment business. The food service segment, before this $2.7 billion purchase made $62 million in operating earnings in 2007. Enodis, next year will likely only contribute $30 million of after tax earnings. That means the company paid 90 times earnings given the $2.7 billion price.
BUT it gets worse. The company was then forced to sell Enodis's ice business just 6 months later for $150 million. The company then sold its Marine business in early 2009 for $321 million when it had operating earnings of $26 million. The company later sold its Kysor Warren business in late 2010. Given all these sales and their prices they probably gave up around $50 million of operating earnings and they got maybe $120. However they then took on of $1.4 billion of net debt to make the acquisition. So the company increased its profit by a total of $4 million a year by the acquisition after adjustments. And they now paid an adjusted PE of 675. Great acquisition there by management. Did we mention this acquisition put MTW in a still perilous financial state. We did now.
Given MTW's poor acquisitive performance it makes one look to the king, Terex. Terex shares are valued similarly to MTW's despite having a pristine financial position. Terex has twice the revenues and more than twice the earnings power. It made one divesture in 2009 selling something at 17 times earnings when its stock was trading at under 2. It also then bought a company selling at cheap price called Demag cranes. Terex has done it again but their stock price does not reflect its share price. Also did we mention that Terex has much better growth? Perhaps Terex's share price is the market mispricing of the century and Manitowoc's also is for all the wrong reasons.
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