Manitowoc (NYSE:MTW): Upgraded to Strong Buy at Buckingham Research

Buckingham Research is upgrading their rating on Manitowoc (NYSE:MTW) to Strong Buy with $14 price target from Neutral:

We are raising our rating on Manitowoc to Strong Buy from Neutral as 2 important factors are unfolding; 1) the company is set to continue generating very strong free cash flows in 2009 and again in 2010 which, in our opinion, will take any covenant concerns off of the table and 2) the Crane business continues to see “pockets of strength” which likely takes our trough EPS estimates of $0.35-$0.40 in 2011—more in the range of $0.50-$0.60 in 2011. One factor overall that has been different this cycle is investors willingness to look further out for cyclical names. While cyclical recovery is likely not until 2012 or later, other names set to see recovery in 2011 have already moved strongly off of the bottom.

We are raising our 2010 EPS estimate to $0.55 from $0.40 to reflect the better than expected crane demand. Additionally, while investors are still focused on all of the negatives associated with the Enodis acquisition, the company is busily paying down debt and should remain profitable during this steep downturn—a testimony to the improved balance brought to them from Enodis.

Using a 25X trough P/E multiple on the mid-point of our $0.50-$0.60 trough EPS estimate range brings us to our $14 price target. While we acknowledge that a likely bottom for the crane cycle is 2+ years away and recovery even further out, the longer term upside remains tremendous. Manitowoc earned over $3 in the last cyclical peak and improving margins at Enodis plus some cyclical rebound could push longer term EPS above those levels. Also, staying profitable during this steep downturn should result in longer term multiple expansion. While there is still some residual risk in these shares, the shorter and longer term upside well outweighs the nearer term issues.

Action: With investors looking further and further in the future to find upside, MTW is as good pick as any. If you believe Buckingham about 2010 trough not being as bad as expected, it would be reasonable time to buy.

I expect shares to see continued strength today on these comments, potentially going as high as $9.25-9.50.