Manitowoc (MTW) Withdraws Guidance on Coronavirus Concerns

The Manitowoc Company, Inc. MTW withdrew its guidance for 2020 on account of the coronavirus outbreak. The company also announced that its supply chain has been disrupted, owing to the crisis.

First detected in China, the coronavirus has been rapidly spreading across the world. Notably, it has been declared a pandemic. Per the World Health Organization’s situation report as of Mar 29, 2020, globally affected coronavirus cases have shot up to 634,835, claiming 29,957 lives. The United States is currently the worst affected, with 103,321 cases, followed by Italy with 92,472.

Supply Chain Impacted, Few Facilities Suspended

Manitowoc stated that the coronavirus pandemic has impacted its supply chain and global operations. The outbreak has impacted the company’s global manufacturing activities. It has temporarily suspended manufacturing activity at a few of its production facilities. Manitowoc’s manufacturing facility in China, which had been closed for several weeks, has now resumed normal operations.

Meanwhile, the company stated that it is continuing to operate its manufacturing facilities in the United States and plans to continue operations as permitted by the local authorities to meet customers’ expectations.

Manitowoc has assured that it is taking all necessary steps to protect the safety, health and well-being of employees, customers and suppliers. However, the company may suspend operations at additional facilities if the situation warrants.

2020 Guidance Withdrawn

On its fourth-quarter 2019 conference call, Manitowoc had issued revenue guidance for 2020 at $1.6-$1.7 billion. The mid-point of the guidance range indicated a year-over-year decline of 10%. EBITDA guidance for 2020 was at $85-$115 million, whereas it reported $157 million in 2019. The company has now withdrawn the guidance, citing that the uncertainty of the impact of the outbreak on its financial and operating results cannot be reasonably estimated at this time.

The duration of the pandemic, its geographic spread and the impacts of the governmental regulations imposed in response to the crisis will all have a bearing on Manitowoc’s results. This along with its impact on the demand for the company’s products and services, and supply chain will likely get reflected in the yearly results.

Over the past year, shares of Manitowoc have plunged 53.7% compared with the industry’s decline of 26.7%.

The coronavirus outbreak has dealt a further blow to the manufacturing sector, which was already reeling under the protracted U.S.-China trade tensions and waning global demand. The U.S Purchasing Managers’ Index (PMI) released by the Institute for Supply Management had been below 50 (indicating contraction) for five consecutive months till December 2019. Even though the index climbed to 50.9 in January and came in at 50.1 in February, it seems unlikely that the recovery will sustain, considering that manufacturing has been impacted by the coronavirus outbreak. Factory closures across the globe, the impacts of the restrictions imposed by different governments, supply-chain disruptions, low demand for goods, availability of employees and workers, logistic costs, among others will likely hit the sector.

There has been a spate of guidance withdrawals by the industry players lately. Caterpillar, Inc. CAT, the mining and construction equipment behemoth, withdrew its fiscal 2020 guidance, citing the impacts of the coronavirus outbreak on its supply chain, operations and demand. Terex Corporation TEX, another player in the manufacturing and construction industry, withdrew its guidance for 2020 and suspended all share repurchases.

Also last week, agricultural and construction equipment manufacturer, Deere withdrew its financial outlook for 2020, citing the COVID-19 outbreak. Another farm equipment maker, AGCO followed the suit and withdrew its financial guidance for the current year. Production has been suspended in many of the company’s European facilities primarily due to supply-chain constraints and material shortage. Additional production disruptions in other regions are expected.

Zacks Rank & a Stock to Consider

Manitowoc currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the Industrial Products sector is Sharps Compliance Corp SMED, which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Sharps Compliance has an estimated earnings growth rate of 800% for 2020. In a year, the company’s shares have gained 85%.

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