Manitex International (NASDAQ:MNTX) reported weaker than expected third quarter results but brokerage firm H.C. Wainwright reiterated its buy rating on the company saying that despite the stock reflecting current weakness investors are ignoring a transformational 2015 ahead.
Shares of Manitex which provides engineering lifting solutions were down 1.5 percent at US$11.73 on the Nasdaq as at 2:43pm ET.
Yesterday Manitex reported third quarter revenues and earnings per share of $66.2 million and 13 cents respectively compared to H.C. estimates of $67.9 million and 22 cents per share.
"Though revenues increased 15.1% y/y this is the second quarter in a row that the company’s results fell short of our expectations" wrote analyst Amit Dayal.
"However investors should note that management had highlighted a generally slow environment for capital equipment going into the quarter and we believe we are seeing some impact from that."
Gross margins for the quarter dropped to around 16.5 percent in the third quarter the low end of its historical range due to a higher mix of small tonnage cranes. Dayal said he believes that current inventory however consists of a higher number of higher tonnage cranes which are generally higher margin products and should support near-term margin improvements.
Manitex is also expecting to close two deals by the end of 2014 which Dayal says are "transformational to the company positioning it to almost double revenues and earnings in 2015."
In line with this H.C. Wainwright updated its 2015 revenue and EPS projections for Manitex to $500 million and $1.29 per share respectively with the latter figure representing almost 90 percent year-over-year growth.
"We expect these deals to result in MNTX’s debt growing to $200M (of which $80M is a direct obligation) with $12M in annual interest obligations that is more than adequately covered by ~10% EBITDA margins" Dayal said.
The analyst also highlighted the company's backlog and new orders saying investors should pay attention to the product replacement cycle as one of the catalysts that could revive growth in Manitex's end markets going into 2015. Its backlog remained at $102.1 million at the end of the third quarter.
H.C. Wainwright reiterated its buy rating and $20 price target on the company.
"Manitex stock has pulled back significantly in the last two quarters driven we think by weaker-than-expected financial performance and investor cautiousness around companies with exposure to the energy infrastructure space.
"We believe this overhang is preventing the company from getting any appreciation for the manner in which 2015 results are positioned and this may only be overcome through demonstrated execution" Dayal concluded.
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