Which Industrials Can Make You Rich?
Marina is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Manitex International (NASDAQ: MNTX), General Electric (NYSE: GE) and Siemens (NYSE: SI) are facing difficult business conditions in Europe due to unfavorable macroeconomic conditions, while the North American market is their core-strength. In this article, I aim to deliver a clearer picture on where the industrials stand. Our argument makes a largely statistical case for suggesting which stock is the best bet for your profits.
Manitex International is a leading provider of engineered lifting solutions, including boom truck and rough terrain cranes, forklifts, special mission oriented vehicles, container handling equipment and specialized engineered trailers. Perfect for transporting and unloading large, heavy equipment, the company’s boom trucks contributed 60% of the increase in revenue for the second quarter. In addition, Manitex has launched a higher capacity truck crane, the 70-ton ‘Manitex TC700,’ from which shareholders should expect higher revenues in the next quarter amid a drop in R&D spending and an increased product line.
On July 1, the industrial giant General Electric finalized the acquisition of a leading artificial lift technologies provider – Lufkin Industries. Lufkin is a profitable company, with 13.8% quarterly revenue growth year-over-year, and outstanding 75.5% quarterly earnings growth year-over-year. Thanks to brilliant performance in the stock market, Lufkin’s stock has gained more than 50% on the year. This growth was fueled by massive reactions among investors once it was announced that General Electric agreed to acquire Lufkin.
A long-term conglomerate competitor of General Electric, Siemens has been on a cost-cutting and streamlining run for the past two years and is pressing on with this in 2013 as well. It is reported that approximately 4,000 jobs will be slashed in the company's industrial sector. Siemens has also been selling telecommunication assets recently and willing to finalize its partnership with Nokia, i.e. Nokia Siemens, this year.
For the first quarter, Manitex recorded a 39% increase in net revenues and a 52% increase in net income when compared to the same quarter of the previous year. The company’s ability to meet short-term obligations is not very encouraging due to the availability of its more liquid assets. This could damage the company as it has just launched its new product into a market that is dominated by heavyweights and companies worth multi-billions. However, this should not be a concern for investors as Manitex’s debt/equity ratio and its depleting backlog will contribute to increasing liquidity.
General Electric can be fairly considered a safe stock due the company's massively diversified product base, incomparable access to debt and equity markets, and steadfast market position. Thanks to all these advantages, and despite the likely acceleration in revenue growth in a recovering economy, the company is trading at 16.4 times trailing earnings, 9 times cash flow, and 2 times book value.
After selling off periphery operations and refocusing on aerospace and industrial infrastructure, General Electric's ROE has recently improved. The debt/equity ratio (1.9) looks phenomenal due to the presence of the company's financial arm – GE Money, providing credit to General Electric in the form of debt. However, the recent sale of NBC Universal has also allowed the company to reduce its outstanding debt.
Siemens has recovered rapidly from the decline in its stock price, but remains susceptible to price shocks. The company has warned analysts not to expect a positive result due to problems in railway technology and power transmission operations. Furthermore, weakened demand in Germany has also provided unfavorable results and the company expects its annual profit decline to be between $5.8 billion and $6.5 billion, down from $6.7 billion last year.
Over the past 10 years, Manitex versus its competition seems to be like David versus Goliath. Manitex has unlocked more shareholder value than its larger competitors, and despite being much smaller in size, Manitex outperformed the market averages on a ten-year basis. This is surprising due to the company's inability to beat its competition in the rising business period of the early 2000s.
While Siemens puts up consistent competition when looked at from a ten-year perspective, Manitex has no industry competitor to keep up with it from a five-year perspective as the company becomes more profitable for its investors.
Projections for the future
Manitex is facing difficult business conditions in Europe due to unfavorable macroeconomic conditions while the North American market is its core-strength. However, the introduction of a 70-ton crane on a standard truck chassis will be pivotal in improving its revenues further. Keeping in mind how the company has consistently improved on its revenue for the last 3 years, Manitex is on somewhat of a roll.
General Electric will continue to benefit significantly from GE Capital moving forward. The portfolio restructuring for GE Capital is expected to be completed by the end of 2013, and it should set the stage for improved profits in 2014. Moreover, the recent profitable bargain – the acquisition of Lufkin for $3.3 billion – will allow General Electric to benefit significantly from the artificial lift technology, utilities, and expertise of Lufkin to reach out to more customers a lot faster and more effectively.
The difficult situation in Europe, with bailouts and stimulus packages, damages the company's financial background, however, General Electric strives to recover through other geographical operations. The share buyback, the dividend increase, the refocus on energy - these advantages go a long way in shaping an investor's perception.
Siemens has also made deals in various parts of the world, including Teradata in United States and the Petchem plant in Qatar. While these developments are necessary to keep the company where it is, I don't observe any fundamental breakthrough, which would attract investors to the company. With less optimistic reports coming out regarding the next quarter's results, the prospects of Siemens being a contender for investors is bleak.
While all three stocks are undervalued, Manitex actually provides a brilliant opportunity for investors because of its empirically proven trend and potential on the price chart. All three of these stocks are an intrinsically good value, but with Siemens being very pricey and General Electric still trying to latch itself free from all the acquisitions done in the 2000s, Manitex is indeed a low-risk alternative.
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Marina Avilkina has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!