Hyster-Yale Beats on Q4 Earnings - Analyst Blog

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Hyster-Yale Materials Handling, Inc. ( HY ) reported fourth-quarter 2013 earnings at $1.53 per share, which marked a 21% year-over-year decline. Results however, surpassed the Zacks Consensus Estimate of $1.47.

Operational Update

Revenues in the quarter increased 10% year over year to $717.9 million driven by increases in unit volumes, mainly in the Americas and Europe. Price increase also favored revenue growth, partly offset by unfavorable foreign currency movements. Revenues came ahead of the Zacks Consensus Estimate of $693 million.

Revenues grew 12.5% year over year to $462 million in the Americas, driven by favorable effect of unit price increase and rise in fleet services and shipments. Sales in Europe increased 15% to $202.5 million from $176 million in the year-ago quarter. However, revenues in the Asia-Pacific region were $53 million, down from $65 million in the year-ago quarter.

Cost of sales was $592 million in the said quarter compared with $544.7 million in the prior-year quarter. Gross profit increased 17% year over year to $126 million. Consequently, gross margin expanded 100 basis points (bps) to 17.5% year over year.

Selling, general and administrative expenses increased 16% to $90.9 million on a year-over-year basis. The rise was primarily due to higher marketing expenses in the Americas and Europe to support the company's five strategic initiatives and higher incentive compensation expenses.

Operating profit in the reported quarter grew 20.7% year over year to $35 million attributable to an increase in unit and parts volumes as well as production efficiencies. These were partially offset by higher selling, general and administrative expenses. Operating margin expanded 50 bps to 4.9% in the quarter.

Backlog

Worldwide backlog was around 28,200 units as of Dec 31, 2013 compared with 27,300 units as of Dec 31, 2012. In the fourth quarter of 2013, worldwide new unit shipments were 22,700 units compared with 20,100 units in the year-earlier quarter.

Financial Update

Hyster-Yale ended 2013 with cash and cash equivalents of $175.7 million, up from $151.3 million as of 2012-end. Cash flow from operations was $152.9 million as of Dec 31, 2013, against $128.7 million as of Dec 31, 2012.

Fiscal 2013 Performance

For full-year 2013, Hyster-Yale reported earnings per share (EPS) of $6.54, up around 12% from $5.83 in 2012. The results beat the Zacks Consensus Estimate of $5.78.

Revenues for the year increased 8% year over year to $2.7 billion, surpassing the Zacks Consensus Estimate of $2.6 billion.

Outlook

Hyster-Yale expects the global market for forklift trucks to grow slightly in 2014.  Market growth and a strong ending backlog in 2013 will aid unit shipments and parts volumes increment. The majority of this increase is expected to come from the Americas, with smaller increases in the Asia-Pacific and European unit shipments.

The company anticipates sales to improve moderately in 2014. Operating profit is also expected to increase on the back of favorable effect of strategic initiatives and product enhancements. A lower estimate for equity incentive compensation is also projected to contribute toward a higher operating profit. Cash flow for 2014 is expected to decline primarily due to increase in capital expenditures resulting from the construction of a new plant in Brazil.

Our View

Hyster-Yale will benefit from new programs and platforms that are expected to be developed and launched over the next few years based on longer-term segment needs or technological change opportunities. Hyster-Yale also remains focused on improving margins in its internal combustion engine business through the execution of its five strategic initiatives. However, material costs as well as marketing and employee costs are expected to increase in 2014.

Notably, the company anticipates the demand in Europe to remain weak, given the stressed macroeconomic conditions there. Increase in capital expenditures, largely due to information technology improvement in Brazil will also hurt growth. Moreover, volatility in foreign exchange rates and an overall uncertain economic environment are the other headwinds.

Cleveland, Ohio-based Hyster-Yale engages in the design, engineering, manufacture, sale and servicing of a comprehensive line of lift trucks and aftermarket parts. At present, it has a Zacks Rank #3 (Hold).

However, some better-ranked stocks in the same industry include Altra Industrial Motion Corp. ( AIMC ), Barnes Group Inc. ( B ) and Graco Inc. ( GGG ). All of these have a Zacks Rank #2 (Buy).



ALTRA HOLDINGS (AIMC): Free Stock Analysis Report

BARNES GRP (B): Free Stock Analysis Report

GRACO INC (GGG): Free Stock Analysis Report

HYSTER-YALE MAT (HY): Get Free Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: EPS , AIMC , B , GGG , HY

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