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Riding a Global Building Boom

This maker of cranes has boosted sales by 900% in the past decade.

The world needs more cranes. China and Saudi Arabia plan to build entire cities from scratch over the next decade. Other emerging markets want more bridges, power plants, roads and skyscrapers to satisfy their thriving economies. Cranes are essential for such projects, and many of these machines will be made by a company whose name sounds like a summer camp.

Manitowoc is a rapidly growing manufacturer. Since 1995, the company has acquired 15 rivals, and its annual sales have swelled from $313 million to $2.9 billion. Yet Manitowoc is dwarfed by Caterpillar and Deere, giants in the construction-equipment industry. That means Manitowoc has more potential to generate accelerating sales and profits than its bigger peers. Plus, the company has a global reach (unusual for a firm its size), with factories in China and service centers in Brazil, Dubai and Russia, among other foreign markets.

Judging by its backlog of orders, Manitowoc has a long way to go before it slakes customer demand. The company had $1.9 billion in unfilled crane orders as of March 31, up 92% from the same time last year. It wants to boost production capacity to meet the increased need, and the company plans to spend $80 million in 2007 toward that end.

Cranes are also required to quench the world's unrelenting thirst for energy. Manitowoc machines are used to erect offshore oil platforms, build nuclear power plants and service wind turbines. "Almost any way you're going to deliver more energy, you need cranes," says Terry Growcock, the company's chairman.


New models offer customers strong incentives to upgrade their fleets. Joysticks, computer-screen displays and improved hydraulics make the new cranes easier to operate than older ones, which require workers with more skills. In other words, construction companies buy Manitowoc cranes to help reduce their labor costs, Growcock says.

Manitowoc is no one-trick pony. The crane business makes up about 78% of sales, but the contributions of its food-service and shipbuilding divisions are often overlooked. These businesses have buffered the company against the whims of crane demand. Food service has been particularly steady, with about four-fifths of the sales coming from customers that buy replacements for existing ice machines, beverage dispensers and other restaurant equipment. The marine division builds vessels for the U.S. Navy and Coast Guard, as well as commercial barges, ferries, icebreakers and tugs.

The Manitowoc, Wis., company has been on a roll. It has topped analyst profit estimates eight consecutive quarters. And the stock (symbol MTW) has soared more than 290% over the past five years. At $77, it trades at 17 times estimated 2007 earnings, which is slightly higher than the price-earnings ratio of stocks of other construction-equipment makers. But Manitowoc is growing more rapidly than the likes of Caterpillar and Deere and deserves a higher P/E. Bank of America analyst Seth Weber predicts that the current bullish cycle for cranes could last until 2009 and rates the stock a buy.