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Lift truck and material handling solutions manufacturer Hyster-Yale Materials Handling (NYSE:HY) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 2.5% year on year to $1.12 billion. It made a GAAP profit of $3.58 per share, improving from its profit of $2.21 per share in the same quarter last year.
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Hyster-Yale Materials Handling (HY) Q2 CY2024 Highlights:
- Revenue: $1.12 billion vs analyst estimates of $1.08 billion (3.5% beat)
- EPS: $3.58 vs analyst estimates of $2.28 (57% beat)
- Gross Margin (GAAP): 18.7%, up from 18.1% in the same quarter last year
- Adjusted EBITDA Margin: 9.9%, up from 6.3% in the same quarter last year
- Market Capitalization: $1.21 billion
Professional Tools and EquipmentAutomation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Regrettably, Hyster-Yale Materials Handling's sales grew at a weak 4.8% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Hyster-Yale Materials Handling's annualized revenue growth of 12.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
This quarter, Hyster-Yale Materials Handling reported reasonable year-on-year revenue growth of 2.5%, and its $1.12 billion of revenue topped Wall Street's estimates by 3.5%. Looking ahead, Wall Street expects sales to grow 1.4% over the next 12 months, a deceleration from this quarter.
Operating MarginHyster-Yale Materials Handling was profitable over the last five years but held back by its large expense base. It demonstrated lousy profitability for an industrials business, producing an average operating margin of 1.8%. This result isn't too surprising given its low gross margin as a starting point.
On the bright side, Hyster-Yale Materials Handling's annual operating margin rose by 5.2 percentage points over the last five years
This quarter, Hyster-Yale Materials Handling generated an operating profit margin of 9.2%, up 3.9 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Hyster-Yale Materials Handling's EPS grew at an astounding 48.5% compounded annual growth rate over the last five years, higher than its 4.8% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into Hyster-Yale Materials Handling's earnings to better understand the drivers of its performance. As we mentioned earlier, Hyster-Yale Materials Handling's operating margin expanded by 5.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Hyster-Yale Materials Handling, its two-year annual EPS growth of 65.8% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Hyster-Yale Materials Handling reported EPS at $3.58, up from $2.21 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Hyster-Yale Materials Handling to perform poorly. Analysts are projecting its EPS of $10.00 in the last year to shrink by 25.4% to $7.46.
Key Takeaways from Hyster-Yale Materials Handling's Q2 Results We were impressed by how significantly Hyster-Yale Materials Handling blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. Zooming out, we think this was a solid quarter. The stock traded up 2.4% to $71.28 immediately following the results.
