A schedule 13D filed with the SEC this afternoon revealed that Icahn Capital Management reduced its stake in Manitowoc Company Inc (NYSE: MTW) by $31.3 million.

Icahn Capital Cuts Manitowoc Position

On February 14th, Carl Icahn’s firm Icahn Capital Management filed its quarterly Form 13F regulatory filing. The filing showed that the investment firm held 2,645,657 shares of Manitowoc worth $104.1 million as of December 31st.

However, a new filing today revealed that Icahn Capital Management sold a total of 939,381 shares worth a total of $31.3 million over the last two weeks.

Icahn Capital Selling Activty Of MTW
Entity Date #Shares Value ($)
High River Limited Partnership Feb 22 43,971 $1,427,738
Icahn Partners LP Feb 22 104,329 $3,387,563
Icahn Partners Master Fund LP Feb 22 71,557 $2,323,456
High River Limited Partnership Feb 21 73,905 $2,428,518
Icahn Partners LP Feb 21 175,349 $5,761,968
Icahn Partners Master Fund LP Feb 21 120,270 $3,952,072
High River Limited Partnership Feb 13 15,000 $512,100
Icahn Partners LP Feb 13 35,590 $1,215,043
Icahn Partners Master Fund LP Feb 13 24,410 $833,357
High River Limited Partnership Feb 12 55,000 $1,887,050
Icahn Partners LP Feb 12 131,928 $4,526,450
Icahn Partners Master Fund LP Feb 12 88,072 $3,021,750
TOTAL 939,381 $31,277,065

The company’s shares last traded at $31.87 as of Thursday, down -19.5% over the last month but still up 22.4% over the last year. Could the recent selling activity signal a troubling road ahead for shareholders?

MTW Stock Price Chartsource: finbox.io

Potential Reasons For Selling Shares

The Manitowoc Company provides engineered lifting equipment for the construction industry worldwide. Analysts covering the stock often compare the company to a peer group that includes Terex (NYSE: TEX), Allison Transmission (NYSE: ALSN), Oshkosh (NYSE: OSK) and Caterpillar (NYSE: CAT). Analyzing Manitowoc’s growth metrics and valuation ratios provides further insight into why Mr. Icahn reduced his holdings.

5-year revenue CAGR is the average annual growth rate of revenue over a five year period. It’s calculated as follows:

5yr CAGR = [ Revenue FY / Revenue FY-5 ] ^ (1/5 years) - 1.

The chart below plots the five-year revenue compounded annual growth for Manitowoc and its peers.

MTW Revenue Growth vs Peers Chart

The company’s 5-year revenue CAGR of -14.8% is well below all of its selected comparable public companies. In addition, the company’s future growth as projected by Wall Street analysts is only mediocre relative to this same peer group.

Return on Assets (ROA) represents the dollars in earnings or Net Income a company generates per dollar of assets. ROA is typically used to gauge the efficiency of the company and its management at deploying capital to generate income for shareholders. It is calculated as follows:

ROA = Adjusted Net Income / Average Total Assets.

In general, a higher return on assets suggests management is utilizing the asset base efficiently. Manitowoc’s ROA of -3.7% is below all of its selected comparable public companies: TEX (-2.4%), ALSN (8.2%), OSK (6.8%) and CAT (1.1%).

MTW ROA vs Peers Chart

It appears the company’s growth and investor returns have generally underperformed its peers. What make’s the stock even less attractive are its pricey valuation multiples.

MTW EBITDA Multiples vs Comps Chart

The company’s LTM EBITDA multiple of 105.9x is much higher than all of its selected comparable public companies. On a projected basis, Manitowoc’s forward EBITDA multiple of 12.9x also trades above the majority of its peers.

In addition, a number of finbox.io’s future cash flow models imply that the stock’s overvalued. The average fair value estimate of $22.79 implies -28.5% downside and is calculated from 4 separate analyses as shown in the table above.

Manitowoc Company Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF EBITDA Exit $26.53 -16.8%
5-yr DCF EBITDA Exit $30.11 -5.5%
10-yr DCF Growth Exit $17.66 -44.6%
5-yr DCF Growth Exit $16.88 -47.0%
Average $22.79 -28.5%

Even though Manitowoc shares have traded lower over the last month, the stock still appears to be trading at a premium to its intrinsic value. This could be a reason why Carl Icahn’s reducing his stake in the company.

It is important to note that investors should never blindly copy the trading activity of illustrious money managers such as Carl Icahn. However, keeping an eye on their buying and selling activity will help in making a more informed decision.

I recommend investors continue their research on Manitowoc to get a more comprehensive view of the company.

Author: Brian Dentino

Expertise: financial technology, analyzing market trends

Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.

Brian can be reached at [email protected].

As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.