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On Wednesday, Baird analysts downgraded Hillman Solutions Corp. (NASDAQ:HLMN) stock from Outperform to Neutral and lowered the price target to $9.00 from the previous $12.00. The stock, currently trading at $7.92, has declined nearly 28% over the past six months, according to InvestingPro data. The downgrade is a response to several concerns including the company’s exposure to tariffs, inefficiencies in passing through prices, margin challenges, and the strategic pivot to Retail Distribution Services (RDS) which are expected to pose near-term headwinds. Despite these challenges, InvestingPro data shows the company maintains a healthy gross profit margin of 48% and sufficient liquidity to meet its short-term obligations.
Hillman Solutions, a provider of hardware-related products and services, has been facing difficulties due to tariff exposure which is impacting its pricing strategy. Baird analysts believe that while Hillman Solutions will likely overcome these tariff-driven pricing issues, the process will be gradual, similar to the recovery from the supply chain cost spikes experienced between 2021 and 2023.
The analysts also noted that the current economic uncertainty might negatively affect foot traffic in the home improvement retail sector, which could have further implications for Hillman Solutions’ performance. As such, Baird has decided to adopt a more cautious stance until there is more clarity on these issues.
The strategic shift towards RDS is also identified as a potential concern. This pivot represents a significant change in the company’s operational focus and may introduce additional challenges during the transition period.
Baird’s decision to downgrade the stock and adjust the price target is a reflection of these combined factors affecting Hillman Solutions. The firm is taking a step back to observe how the company navigates the tariff-related pricing recovery and the broader economic factors that might influence its market performance in the near term. Based on InvestingPro analysis, the stock appears slightly undervalued at current levels, with analysts maintaining an average price target suggesting potential upside. For deeper insights into Hillman Solutions’ valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Hillman Solutions reported its fourth-quarter 2024 earnings, which fell short of analyst expectations. The company recorded earnings per share of $0.10, slightly below the $0.11 estimate, with revenue reaching $349.6 million, narrowly missing the consensus of $350.19 million. Despite these shortfalls, Hillman Solutions saw a marginal increase in net sales compared to the same quarter last year. For fiscal year 2025, the company projects revenue between $1.50 and $1.58 billion, which aligns closely with the consensus estimate of $1.54 billion. Hillman Solutions has been recognized for its strong performance in 2024, achieving record-adjusted EBITDA and reducing net debt, with accolades from major clients like Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW).
Analysts from Benchmark and Stifel have maintained their Buy ratings for Hillman Solutions, both setting a price target of $16. Benchmark noted the company’s resilience and strategic positioning for growth in fiscal year 2025, despite facing market challenges. Stifel highlighted Hillman’s ability to achieve nearly 10% organic Adjusted EBITDA growth, even with a decline in organic sales growth for FY24. Looking ahead, Stifel anticipates a 4% top-line growth for Hillman Solutions in FY25, driven by new business wins and integration efforts.
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