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On Friday, Canaccord Genuity adjusted its price target for Hudson (NYSE:HUD) Technologies (NASDAQ:HDSN) to $6.25, down from the previous $8.00, while maintaining a Hold rating on the stock. The firm’s analysts cited a mix of company performance and market conditions as the basis for the revision. According to InvestingPro data, the stock currently trades at a modest P/E ratio of 8.25x, suggesting potential value despite its 51.6% decline over the past year. InvestingPro analysis indicates the stock may be undervalued at current levels.
Hudson Technologies experienced an increase in sales volume and an 18% rise in reclaim activity in fiscal year 2024. Despite these gains, the distribution revenues of the company are still being affected by the overall price of HFC refrigerants. InvestingPro data reveals the company maintains strong financial health with an impressive Overall Score of 3.32 (rated as "GREAT"), supported by robust cash flow metrics and solid balance sheet strength. Discover 13 additional exclusive ProTips and comprehensive analysis with an InvestingPro subscription. The analysts noted that while the company is facing a 30% reduction in consumption allowances for virgin HFC refrigerants in 2024, which is expected to decrease upstream inventory balances year over year, high inventory levels persist and may not see price improvements until the second half of 2025 or later.
The company’s growth in reclaim volume, which was up 18% in 2024, implies that Hudson Technologies may need to purchase less virgin gas in the coming years if this trend continues. With reclaimed gas sales on the rise, the company’s gross margins are anticipated to improve, given that reclaim sales have a 50% margin compared to approximately 25% for virgin gas.
The analysts also highlighted that higher HFC prices could incentivize HVAC contractors to return cylinders from old units to Hudson Technologies, as the company offers a financial incentive for this practice and does not distribute to contractors that fail to return gas. This could further support the company’s reclaim sales.
Looking ahead, Hudson Technologies’ management expects the Defense Logistics Agency (DLA) contract to bring in around $32 million in revenue in 2025, with the potential to reach mid-30s million in revenues. The company’s financial position remains solid, with InvestingPro data showing more cash than debt on its balance sheet and a strong current ratio of 4.37x. This robust liquidity position supports management’s M&A strategy. For deeper insights into Hudson Technologies’ financial health and growth prospects, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. In 2024, Hudson Technologies invested approximately $1 million in strategic analysis, targeting potential acquisitions in smaller distributors, reclaimers, and HVAC equipment services.
The new price target of $6.25 is based on a 12.1 times price-to-earnings (P/E) multiple applied to Canaccord’s revised 2025 earnings per share estimate of $0.52, down from the prior multiple of 14.4 times the 2025 estimated earnings per share.
In other recent news, Hudson Technologies reported its financial results for the fourth quarter of 2024, which fell short of market expectations. The company announced an earnings per share (EPS) of -$0.06, missing the forecast of -$0.03, and reported revenue of $34.64 million, which was below the anticipated $37.96 million. This marked a 23% year-over-year decline in revenue for the quarter. For the full year, Hudson Technologies’ revenue decreased by 18% to $237.1 million, with a net income of $24.4 million, down from $52.2 million in 2023. The company’s gross margin also contracted to 28% from 39% the previous year, mainly due to declining refrigerant prices.
Despite these challenges, Hudson Technologies maintained a strong cash position of $70 million with no debt and repurchased $8.1 million in stock during 2024. Analysts from firms like Roth Capital have noted the company’s strategic focus on reclaimed refrigerants, which offer higher margins. Looking forward, Hudson Technologies expects gross margins to remain in the mid to upper 20% range for 2025 and anticipates revenue from its Defense Logistics Agency (DLA) contract to be in the low to mid-$30 million range. The company continues to navigate market dynamics and regulatory changes, focusing on strategic acquisitions and expansions to bolster its position in the evolving refrigeration industry.
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