On Monday, KeyBanc Capital Markets adjusted its stance on Hayward Holdings Inc (NYSE:HAYW), downgrading the stock from Overweight to Sector Weight. The change in rating reflects the analyst's view that, despite recent positive sentiment due to rate cuts and a notable 26% price surge over the past six months, a more cautious outlook is appropriate for the company's growth prospects in the coming year.
Jeffrey Hammond of KeyBanc expressed that while long-term growth in the pool equipment sector is expected to remain strong due to a high aftermarket mix, 2025 is anticipated to be a transitional period for the industry.
The analyst pointed out that the current consensus estimates, which project approximately 6% core growth for Hayward Holdings in 2025, might be overly optimistic and could lead to potential disappointments in the company's initial outlook for the year.
According to InvestingPro data, the company maintains impressive gross profit margins of nearly 50% and strong liquidity with a current ratio of 2.62, suggesting operational efficiency despite growth concerns.
The analyst also noted the valuation of Hayward Holdings, stating that although there is a valuation gap compared to its peers, the stock's current valuation is on the higher end of its historical range, with an estimated 14.2 times 2025 expected EV/EBITDA. This high valuation assessment aligns with InvestingPro analysis, which shows the stock trading at a P/E ratio of 34.1 and indicates fair valuation at current levels.
This valuation picture, combined with limited room for upward revisions in performance, suggests a more balanced risk/reward scenario for investors. For deeper insights into Hayward's valuation metrics and 10+ additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.
KeyBanc's assessment indicates caution regarding Hayward Holdings' stock, suggesting that the anticipated durable growth in the pool equipment segment may not translate into significant outperformance for the company in the near term. With a market capitalization of $3.27 billion and moderate debt levels, the firm's revised rating is a signal to investors that expectations for Hayward Holdings should be tempered as the market heads into a year of transition.
In other recent news, Hayward Holdings, a leading pool equipment manufacturer, has reported positive growth in its third quarter of 2024 earnings call despite market challenges. The company announced a 3% increase in net sales, reaching $228 million, fueled by the acquisition of ChlorKing and innovative product launches. Adjusted EBITDA rose by 8% to $51 million, and the gross profit margin expanded to 49.7%.
North America led the way with a 5% sales increase, despite a decline in Europe and other global markets. The company's full-year guidance was also raised, projecting net sales growth of 3% to 5% and adjusted EBITDA growth of 5% to 9%.
In light of these recent developments, Hayward Holdings is focusing on the aftermarket segment and customer experience enhancements, alongside efficient capital allocation strategies, to sustain its growth in a challenging economic environment. The company is also considering potential strategic acquisitions and share repurchases as part of its growth strategy.
Despite anticipated declines in discretionary markets and challenges in new construction and remodel segments, the company remains confident in navigating these challenges and delivering value to stakeholders.
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