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Hyster-Yale (HY) Q4 Earnings Miss Estimates, Decline Y/Y

Zacks Equity Research

Hyster-Yale Materials Handling, Inc.’s HY reported fourth-quarter 2016 earnings of 74 cents per share, a 30% decline year over year. Further, earnings missed the Zacks Consensus Estimate of 87 cents per share by 15%.

Operational Update

Revenues in the quarter increased 7% year over year to $690.6 million, falling short of the Zacks Consensus Estimate of $696 million. Global new unit shipments increased to approximately 22,900 units in the reported quarter from 22,200 units in the prior-year quarter. Bookings were approximately 21,900 units, or $530 million compared with 22,000 units, or $510 million in the prior-year quarter. Worldwide backlog was around 29,600 units (or $710 million) as of Dec 31, 2016 compared with 26,900 units ($660 million) as of Dec 31, 2014.

Revenues dipped 2% year over year to $432 million in the Americas segment. Sales in Europe increased 10% to $173 million from $158 million in the year-ago quarter. Revenues in the JAPIC segment, which includes operations in the Asia and Pacific markets, including China, were $44.5 million, down 21% year over year.

Bolzoni, which was acquired by Hyster-Yale on Apr 1, 2016, reported revenues of $40.5 million and operating profit of $1.7 million in fourth-quarter 2016. Nuvera reported revenues of $0.6 million in the reported quarter compared with revenues of $0.4 million in the prior-year quarter. Fourth-quarter 2016 operating loss was at $12.6 million, wider than the operating loss of $6.1 million in fourth-quarter 2015.

Cost of sales was $579.6 million in the reported quarter compared with $534.4 million in the prior-year quarter. Gross profit remained flat at $111 million. Gross margin contracted 100 basis points (bps) to 16.1% year over year. Selling, general and administrative expenses increased 22% to $103 million on a year-over-year basis. Operating profit plunged 68% year over year to $8.4 million in the quarter.

Financial Update

Hyster-Yale ended the year with cash and cash equivalents of $43.2 million, down from $155 million as of 2015-end. Cash used in operations was $49 million in 2016 compared with cash inflow of $89 million in the prior year. As of Dec 31, 2016, debt stood at $211 million, up significantly from $53 million as of Dec 31, 2015. Both the decline in cash as well as debt position can be attributed to the acquisition of Bolzoni and an unplanned systems-related acceleration of supplier payments in Dec 2016.

Hyster-Yale Materials Handling, Inc. Price, Consensus and EPS Surprise

Hyster-Yale Materials Handling, Inc. Price, Consensus and EPS Surprise | Hyster-Yale Materials Handling, Inc. Quote

Fiscal 2016 Performance

Hyster Yale reported earnings per share of $2.61 in 2016, a 43% drop year over year. Earnings also lagged the Zacks Consensus Estimate of $2.73. Revenues remained flat at $2.6 billion, and came in line with the Zacks Consensus Estimate.

The global lift truck market in 2017 is expected to be comparable to 2016. Hyster Yale will continue to focus on gaining market share and develop new products. On the flipside, commodity costs are expected to increase in 2017 from the low 2016 levels.  Bolzoni expects 2017 revenues to increase on a year-over-year basis, on the back of anticipated growth in the EMEA markets, recent OEM commitments and the implementation of sales enhancement programs. The execution of integrated lift truck and Bolzoni programs will aid profit growth. In Nuvera, new orders are being received and there remains a potential for sales growth.  

Hyster-Yale expects the Americas market to moderate in 2017 dragged down by a weaker North America market, countered by a partial market recovery in Brazil.  Nevertheless, unit shipments, revenues and parts sales are expected to rise in 2017 over 2016 due to an increase in sales of higher-priced Class 2 and Class 5 internal combustion engine trucks and growing market share.

Moderate growth is anticipated in the EMEA markets as strength in Eastern and Western Europe markets will be offset by lower demand in the Middle East and Africa, as well as moderating market demand for Class 5 Big Trucks. However, market share gains and product price increases will lead to improved units and parts revenues in 2017.

The JAPIC market is expected remain at same levels with 2016, with improvements in the Asia and China markets mostly offset by moderating Japan and Pacific markets. However, as a result of the continued implementation of the company's strategic initiatives, revenues and operating results will be elevated from the 2016 levels.

In the past six months, Hyster Yale outperformed the Zacks categorized Machinery-Material Handling sub industry. The company’s shares gained around 16.7% during this period, compared with roughly 15.3% increase recorded by the industry.

At present, Hyster-Yale carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the same space include ACCO Brands Corp. ACCO, Deere & Company DE and The Timken Company TKR. All three of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ACCO Brands has a positive average earnings surprise of 24.74% for the last four quarters. Deere generated a positive average earnings surprise of 60.5% in the trailing four quarters. Timken has delivered an average positive earnings surprise of 7.62% in the past four quarters.

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