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On Monday, Canaccord Genuity maintained a Hold rating on Hudson (NYSE:HUD) Technologies (NASDAQ:HDSN) but reduced the price target to $6.25 from $8.00. The stock, currently trading at $5.80, has seen a significant decline of over 50% in the past year. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.21, despite challenging market conditions. Hudson Technologies reported growth in sales volume and an 18% increase in reclaim activity for the fiscal year 2024, yet distribution revenues are still affected by the fluctuating price of Hydrofluorocarbons (HFCs).
Management at Hudson Technologies anticipates that the 30% cut in consumption allowances for virgin HFC refrigerants in 2024 will decrease year-over-year upstream inventory balances. While high inventory levels persist and revenue declined 17.96% in the last twelve months, the company maintains strong operational efficiency with a current ratio of 4.09. Price improvements may not materialize until the second half of 2025 or later. The company’s growth in reclaim volume indicates a potential reduction in the purchase of virgin gas in the coming years if the trend continues.
The financial performance of Hudson Technologies is expected to benefit from the higher margins associated with reclaimed gas sales, which boast 50% margins compared to approximately 25% for virgin refrigerants. The increase in HFC prices, especially when reclaim prices surpass those of virgin HFCs, is likely to encourage HVAC contractors to return cylinders from old units to Hudson. The company incentivizes returns and restricts distribution to contractors who do not comply.
Additionally, Hudson Technologies is eyeing potential mergers and acquisitions with its substantial cash balance of over $70 million, having invested around $1 million in strategic analysis in 2024. InvestingPro data confirms the company’s strong financial position, with more cash than debt on its balance sheet and a market capitalization of $256.85 million. Targets may include smaller distributors, reclaimers, and HVAC equipment service providers. The revised price target of $6.25 is based on a 12.1x P/E multiple applied to the adjusted 2025 earnings per share estimate of $0.52, compared to the current P/E ratio of 11.15x. Management also projects that the Defense Logistics Agency (DLA) contract will contribute approximately $32 million in revenue in 2025, with the possibility of reaching mid-30s million in revenue. For deeper insights into Hudson Technologies’ financial health and growth prospects, including 8 additional ProTips and comprehensive valuation metrics, visit InvestingPro.
In other recent news, Hudson Technologies reported its fourth-quarter 2024 financial results, which fell short of expectations. The company recorded an earnings per share of -$0.06, missing the forecasted -$0.03, while revenue reached $34.64 million, below the anticipated $37.96 million. Full-year revenue for 2024 decreased by 18% to $237.1 million, with a gross margin contraction from 39% in 2023 to 28% in 2024. Canaccord Genuity revised its price target for Hudson Technologies to $6.25 from $8.00, maintaining a Hold rating due to market conditions and company performance. Despite challenges, Hudson Technologies saw an 18% increase in reclaim activity, which might reduce the need for virgin gas purchases in the future. The company is also eyeing potential mergers and acquisitions, supported by a strong cash position of over $70 million. Hudson Technologies anticipates revenue from its Defense Logistics Agency contract to be in the low to mid-$30 million range for 2025. The company is focused on reclaimed refrigerants, which offer higher margins, as part of its strategic initiatives.
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