Earnings call transcript: Hyster-Yale Q4 2024 beats EPS forecast

Hyster-Yale Materials Handling Inc. (NYSE:HY) reported its Q4 2024 earnings, surpassing analysts’ expectations with an adjusted earnings per share (EPS) of $1.47, compared to the forecasted $1.22. The company’s revenue of $1.07 billion fell short of the $1.09 billion forecast. Following the earnings release, Hyster-Yale’s stock price rose by 3.29%, closing at $51.75. Trading at a P/E ratio of just 5.95, InvestingPro analysis suggests the stock is significantly undervalued relative to its Fair Value. The market responded positively to the EPS beat and the company’s strategic initiatives, though the stock remains well below its 52-week high of $84.44.

Key Takeaways

• Hyster-Yale’s Q4 EPS of $1.47 exceeded expectations by 20.5%.
• Revenue for the quarter was $1.07 billion, below the forecast of $1.09 billion.
• Stock price increased by 3.29% after the earnings announcement.
• The company reported a 5% increase in full-year revenues, reaching $4.3 billion.
• Strategic initiatives include a $21 million footprint optimization program.

Company Performance

Hyster-Yale demonstrated robust performance in 2024, with revenues reaching $4.3 billion, a 5% increase compared to the previous year. The company achieved a full-year adjusted operating profit of $267 million, marking a 60% increase, and the adjusted operating profit margin reached a record 6%. With an impressive return on equity of 38% and a healthy current ratio of 1.36, the company’s financial health score on InvestingPro ranks as "GREAT." Despite a challenging market environment, Hyster-Yale maintained strong production rates and focused on margin-rich unit sales, expecting to gain market share in 2025. The company has also maintained its dividend payments for 14 consecutive years, with 11 years of consecutive increases.

Financial Highlights

• Revenue: $1.07 billion in Q4 2024, a 4% increase year-over-year.
• Earnings per share: $1.47 in Q4 2024, a 10% increase year-over-year.
• Full-year revenue: $4.3 billion, up 5% from 2023.
• Full-year adjusted operating profit: $267 million, a 60% increase.

Earnings vs. Forecast

Hyster-Yale’s Q4 EPS of $1.47 exceeded the forecast by 20.5%, while revenue of $1.07 billion fell short of the $1.09 billion expectation. The EPS beat is significant, reflecting the company’s operational efficiency and cost management, despite the revenue miss.

Market Reaction

Following the earnings announcement, Hyster-Yale’s stock price rose by 3.29%, indicating investor confidence in the company’s performance and future prospects. The stock’s movement is notable as it approaches the 52-week high of $84.44, with a current price of $51.75.

Outlook & Guidance

Looking ahead, Hyster-Yale anticipates a significant decline in revenues for 2025, with lower lift truck gross profit margins. The company plans to increase operating expenses to support growth initiatives, with capital expenditures expected between $40-80 million. Despite these challenges, Hyster-Yale targets a long-term operating profit goal of 7%. InvestingPro subscribers have access to 6 additional exclusive insights about Hyster-Yale’s valuation and growth prospects, along with detailed financial health metrics and comprehensive research reports that help investors make more informed decisions during market uncertainties.

Executive Commentary

"We’re working diligently to strengthen our business’ foundation to create higher highs and higher lows across the business cycle," stated Scott Minder, CFO. CEO Rajeev Prasad added, "We do expect the first half to be lower... but we do see an increase in the second half of the year."

Risks and Challenges

• Market corrections and declining lift truck bookings could impact revenue growth.
• Potential tariffs and trade wars may affect global operations.
• Increased operating expenses could pressure profit margins.
• Implementation costs for footprint optimization may weigh on short-term financials.
• Economic uncertainties could influence market demand and pricing strategies.

Q&A

During the earnings call, analysts inquired about the market outlook for 2025, booking cancellations, and market moderation. Executives explained that while the first half of 2025 may be weaker, improvements are expected in the latter half, aligning with strategic growth initiatives.

Full transcript - Hyster-Yale Materials Handling Inc (HY) Q4 2024:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Hyster Yale Inc. Fourth Quarter and Full Year twenty twenty four Earnings Costs Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 02/26/2025.

I would now like to turn the conference over to Andrea Seba. Please go ahead.

Andrea Seba, Director of Investor Relations and Treasury, Hyster Yale: Good morning, and thank you for joining us for Hyster Yale’s twenty twenty four fourth quarter earnings call. I’m Andrea Seba, Director of Investor Relations and Treasury. Joining me today are Al Rankin, Executive Chairman Rajeev Prasad, Chief Executive Officer and Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer. During our call, we will be discussing our fourth quarter and full year twenty twenty four earnings release issued yesterday. You can find the earnings release and replay of this webcast on the Hyster Yale website.

The replay will remain available for approximately twelve months. Today’s conference call contains forward looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in greater detail in the earnings release and in our reports filed with the SEC. On this call, we will be discussing our adjusted results. We believe that these are useful in evaluating the company’s operating performance.

Reconciliation of adjusted operating profit, net income and earnings per share to the most directly comparable GAAP financial measures can be found in the company’s earnings release and investor presentation filed with the SEC. With the formalities out of the way, let me turn the call over to Rajeev to begin.

Rajeev Prasad, Chief Executive Officer, Hyster Yale: Thanks, Andrea, and good morning, everyone. I’ll start by providing my operational perspective and some commentary on our markets. Scott will follow with our detailed financial results and outlook. Al will close the call with his perspective and then we’ll open it up for your questions. As we close out 2024, I’d like to start by recognizing our global team for delivering another solid quarter and a strong finish to an already exceptional year.

In quarter four, we generated higher revenue and improved adjusted operating profit versus the prior year and the prior quarter. These strong results were led by the performance of our Americas lift truck business. I’m pleased to report that we made significant progress on our strategic initiatives in the quarter. We began execution on the footprint optimization programs that we shared with you in our quarter three earnings call. These programs are designed to streamline our manufacturing network and optimize our operations.

These programs should lower our costs and reduce our inventories and product lead times. This will better position the company for profitable growth around the world. As a result of these actions, we incurred a $21,000,000 the costs were primarily initiated in the fourth quarter to streamline our manufacturing footprint and optimize operations. As we further deploy these programs in 2025 and 2026, we expect additional implementation costs ranging from $8,000,000 to $16,000,000 in each of the years. These programs are designed to reduce the negative impact from market cyclicality on our business over time.

Program benefits are expected to begin in late twenty twenty five, but will be offset by operational inefficiencies due to lower total production, driven by decreased market demand. Benefits in 2026 are expected to be small as we finalize the programs. Savings are expected to accelerate generating $30,000,000 to $40,000,000 in annual income and cash benefits starting in 2027. In The Americas, we are focused on programs to right size the company’s production footprint enabled by our expanding lineup of modular products. We’ll take advantage of manufacturing synergies created by these designs to further enhance profitability.

Executing these programs helps to reduce costs and improve cost absorption rates in our factories, particularly in periods of lower demand. In our EMEA and JPG regions, these optimization programs will help streamline cost structures and better position these businesses for long term profitable growth. Turning to our views on global demand. The global lift truck bookings market continued in its decline in quarter four compared to prior year as expected. Lower demand and order cancellation each played a role.

This ongoing market correction is in response to significantly above trend industry bookings rates in 2022 and 2023. While the booking market declined in 2024, our extended backlog allowed us to maintain strong production rates. Accordingly, our shipments exceeded our bookings in each of the quarters of 2024. As a result, our backlog reached near normal levels by year end, faster than our initial plans. Due to our lower bookings and reduced backlogs, we’ve adjusted our production cadence to maintain a more consistent backlog, one that better aligns with market demand.

Operating our factories at this purposeful pace will help to reduce inventories, improve delivery consistency and ultimately improve customer satisfaction. As market demand improves and our market share is expected to increase across 2025, we expect to gradually increase our production rate. When we do, inventory will increase to support higher production, but our from a lower base with improved efficiency. Early 2025 bookings provide encouraging signs, particularly in our EMEA and JEPIC regions. This elevated activity gives us some confidence that the bookings market will improve across 2025.

While there is early optimism, our market outlook could be impacted by ongoing uncertainty created by potential tariffs and trade wars. If the bookings market on our expected market share gain fails to meet expectations, our global production levels will moderate in the second half of the year. Despite this uncertainty, we continue to focus on booking units with margin at or above target levels. New product introductions, especially those with our new onboard technologies are increasing the potential revenue per unit. Our expanding lineup of modular and scalable models increases our ability to provide customers with products that solve their challenges, while also improving our unit economies.

Countering these high CL specific opportunities is a more competitive market As demand declined in 2024, competitive intensity picked up. We expect this dynamic to continue in 2025 until bookings return to more normal pace. As a result, we expect our strong product margins to decline in 2025, but remain above target levels. Economic uncertainty created by potential tariffs imposed by The U. S.

And others remains a key area of concern. We’ll remain agile with our pricing strategy, responding quickly if our cost structures are negatively impacted. Now I’d like to discuss our focus for 2025. First, I’ll start with the lift truck business. The lift truck business launches modular scalable two to three ton internal combustion engine trucks in 2024.

These products are now available globally and shipments are increasing. The range will expand with cushion tire combustion engine trucks and electric platforms planned for 2025 and 2026. This approach enhances efficiency by integrating ICE and electric trucks on the same production lines, optimizing manufacturing processes. By using these designs, the company can meet customer demand while reducing operational costs and improving working capital. Automation is a key area of development for us.

In 2024, we began customer testing for Yale Relay and Hyster Atlas (NYSE:ATCO) forklift. By early twenty twenty five, a new platform for automated lift trucks and an intuitive portal will be launched, simplifying setup and reducing the need for custom programming. This will help warehouses cut labor costs and software expenses. The enhanced lift truck lineups offer significant value to warehouse customers. We have developed strong technology adoption strategies and specialized training for our dealers.

We saw modest market share gains in 2025 and are poised for above market growth. The lift truck business aims to leverage electric truck advancements in areas once dominated by combustion trucks. We continue to expand the electrification of our internal combustion engine counterbalance products using both lithium ion batteries and fuel cell engines for certain economic specific applications. These projects capitalize on the company’s long history of developing electric powertrains and expanding solutions for customers who want to lower their carbon footprint. Our polyquotene projects are a promising step to broaden our product range.

Next (LON:NXT), I’ll discuss Bolzoni. Bolzoni aims to lead the attachment business by delivering innovative customized solution to address specific mature handling needs. Bolzoni is dedicated to driving growth through core projects beyond the lift truck market. Belzoni is committed to designing products that enhance safety, reduce damage from incorrect handling and improve efficiency. This includes incorporating advanced technologies, components such as sensors, lasers, cameras and optical readers.

To expand its industry reach, Alzoni is working with leading companies in the automated guided vehicle or AGV sector to offer customized attachments often with embedded technologies to facilitate better overall performance. These efforts are expected to increase volumes and margins over time. Lastly, our next steps with Nuverra. Nuverra aims to lead in fuel cell technology by focusing on forty five and sixty kilowatt fuel cell engines, tailored for heavy vehicles and power systems where batteries fall short. The early adopter applications are anticipated to have near term adoption potential.

During 2025, Nuverao looks to expand HydroCharge, a mobile power product providing clean off grid power for rapid electric vehicle charging and clean energy genset applications. In the near term, mobile power generation appears to have the greatest opportunity for commercial application. This supports a number of applications where diesel or battery power generation will not work effectively. Nuverra is now undertaking a focused study on the size and timing of a mobile power strategy. Now, I’ll turn the call over to Scott to provide more detailed financial results and outlook.

Scott? Thanks Rajeev and good morning. As you just heard,

Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer, Hyster Yale: our revenues and adjusted profits improved year over year and sequentially. We had a strong year and ended with a solid quarter. I’ll start by briefly covering our full year consolidated results. We reported 2024 revenues of $4,300,000,000 a 5% improvement over prior year. Our year over year top line growth significantly outpaced the global GDP growth rate.

Full year adjusted operating profit of $267,000,000 improved by nearly 60,000,000 versus prior year. Twenty twenty four’s adjusted operating profit margin was 6%, representing the strongest full year performance in the company’s history. These gains were largely due to the performance of our lift truck business, where revenues grew by 5% and adjusted operating profits improved by 28%. Twenty twenty four’s adjusted net income was $159,000,000 increasing 26% from the strong prior year period. 2024 was a strong year and we took the opportunity to further fund our strategic initiatives.

We invested in additional sales and marketing staff to help accelerate new product introductions and support our share gain efforts. We invested in new information technology tools that create a more efficient and seamless customer experience. Lastly, we initiated the footprint optimization journey enabled by our new modular products. As Rajeev stated, this will ultimately save us tens of millions of dollars per year and reduce the negative impact of market cyclicality on the business. To close out our strong 2024 performance, our fourth quarter results were solid.

At the consolidated level, revenues of $1,100,000,000 grew by 4% versus prior year and by 5% sequentially. Adjusted operating profits were $54,000,000 increasing by 10% and by nearly 60% compared to prior year and prior quarter respectively. Adjusted earnings per share was $1.47 Next, I’ll provide color by segment and geography on the quarter’s performance drivers starting with our lift truck business. Q4 lift truck sales increased 4% year over year largely due to an improved sales mix. The Americas benefited from a mix toward higher value Class four and five trucks, while EMEA sales mix was negatively impacted by a shift to Class three products with lower average revenues.

As we further implement our market penetration strategies, we’re focused on providing the right product with the right technology at the right price. Our customers win through higher productivity and lower total cost of ownership and we’re better able to deliver on our financial commitments over time. Sequentially, revenues grew by 6% as a result of increased deliveries in The Americas and seasonality driven improvements in EMEA. The lift truck business delivered an adjusted operating profit of $62,000,000 increasing by 15% compared to prior year and by 55% sequentially. Volume and mix benefits contributed to strong product margins in the quarter well ahead of our targeted levels, partly offsetting these gains for increased costs for freight and warranty.

We continue to see historically high freight rates despite some relief over the past few months. We’ve taken proactive steps to mitigate these costs, but port strikes and geopolitical issues have limited our ability to fully leverage the lower freight rates. With regard to warranty cost increases, new product introductions often result in increased initial warranty claim rates. We’re in the midst of a generational product shift toward our new modular scalable designs. These new trucks are replacing a prior generation of well tested and highly reliable trucks.

Over time, we expect our new models to equal or surpass the quality of the prior generation in part due to the increased component commonality and more focused supply base. Turning to Bolzoni, the business reported Q4 revenue of $84,000,000 which was $4,000,000 lower than prior year. Q4’s adjusted breakeven operating loss was below the prior year level. Bolzoni’s product mix negatively impacted unit margins and lower volumes drove manufacturing inefficiencies. Operating expense was above prior year primarily due to employee costs and the sale of a small non core business in Europe.

At Nuverra, the Q4 adjusted operating loss improved sequentially due to lower marketing expenses and reduced employee related costs as a result of headcount reduction initiatives initiated in Q3. The hydrogen fuel cell industry continues to face slow customer adoption rates due to ongoing hydrogen supply constraints and delayed customer vehicle development programs. Despite Nuvera’s active demonstration pipeline, these industry constraints are delaying Nuvera’s bookings and reducing its shipments. Next, I’ll cover the company’s tax position. Our Q4 income tax rate was 55%.

This is significantly higher than the full year 2024 rate of 34%. The fourth quarter’s increase was due to the non deductibility of the footprint improvement and operational optimization charges. Company wasn’t able to recognize a tax benefit on these charges due to its valuation allowance position. These items will be included in future tax periods as severance and other expenses are recognized. Twenty twenty four’s effective income tax rate of 34% is higher than the prior year’s rate of 29%.

The elevated 2024 rate is largely due to the ongoing capitalization of research and development costs for U. S. Tax purposes combined with the ramifications from the company’s U. S. Valuation allowance position.

This combination also affected twenty twenty three’s tax rate, but the impact was partly offset by our ability to utilize U. S. Net operating losses during the 2023 year. Turning to the balance sheet, in Q4, we generated $81,000,000 of cash from operations increasing twenty twenty four’s full year generation to $170,000,000 We used a portion of these funds to further reduce debt, which dropped by more than 5% compared to Q3 levels. In addition, we delivered on our commitment to shareholder returns with a consistent and strong dividend and a roughly $5,000,000 Class A common stock repurchase in the quarter.

At year end 2024, the company had unused borrowing capacity of $290,000,000 improving by nearly $30,000,000 compared to the end of Q3. We continue to focus on reducing working capital, particularly through inventory efficiency gains. Total (EPA:TTEF) inventory decreased by $60,000,000 from prior year levels and by $100,000,000 sequentially. These gains stem from better alignment between production needs and on hand materials as we adapt our manufacturing cadence to reduce variation in our factories. Additionally, finished goods held in customer ready status improved due to increased shipping and customer installation discipline.

As a result, working capital represented 18% of sales in Q4, down from 21% in Q3. Now I’ll cover our outlook for full year 2025, including color around our first quarter expectations. Due to the anticipated decrease in our lift truck production levels in Q1 and for full year 2025, we expect a significant year over year revenue decrease in both periods. Lift truck gross profit margins are likely to decline toward target levels due to the negative effect from reduced volumes and increased market competitiveness. Operating expenses are expected to increase year over year in 2025 to support long term profitable growth initiatives.

We anticipate an operating expense run rate similar to Q4 twenty twenty four levels in each 2025 quarter. The company is focused on offsetting a portion of these higher costs through increased use of its low cost shared service capabilities and through more efficient tools and processes. As a result of the lower revenues, margin decline, increased expenses, we expect first quarter and full year ’20 ’20 ’5 operating profit to be significantly below the exceptionally strong 2024 performance. Moving to Bolzoni, twenty twenty five revenues are expected to decline, while operating margins should increase. Both of these changes are a result of the ongoing phase out of lower margin legacy components sold to the lift truck business.

Bolzoni’s twenty twenty five operating profit is expected to be comparable to 2024. At Nuvera, the company is focused on increasing customer product demonstrations and orders, especially for its new hydrocharge product beginning in 2025. Nuverra anticipates full year revenues to increase largely due to sales of this new mobile unit designed to provide off grid charging for a variety of electric vehicle types. We expect a modest increase in product development costs year over year to support further development of the new more powerful 125 kilowatt fuel cell engine. In total, Nuverra’s twenty twenty five operating results are expected to improve modestly compared to 2024 in part due to benefits realized from twenty twenty four’s reduction in force action.

Turning to the consolidated view, I’ll start with our outlook for taxes. Company anticipates its 2025 effective tax rate to be elevated largely due to the ongoing capitalization of R and D costs in its valuation allowance position. U. S. Congress is actively debating an important tax law change that could reverse the R and D cost capitalization rule, thus treating them as a period expense.

If this occurs, the company’s tax expense outlook would change materially. While our effective tax rate is likely to remain elevated, 2025 tax expense is expected to be well below 2024 levels due to lower overall profitability. At the consolidated level, 2025 revenues and profits are expected to decline significantly compared to twenty twenty four’s operating results. This is largely due to the soft global bookings market experienced by our lift truck business in 2024. As Rajeev said earlier, we expect our markets to gradually improve in 2025 providing some momentum as we move into 2026.

The company remains focused on reducing the negative impact from market cyclicality on its business. As markets grow and reach new heights, the business should maximize its operational results. We did that in 2023 and 2024, making solid progress toward our long term operating profit goal of 7% for the lift truck and Bolzoni businesses. As markets decline, as we anticipate in the first half of twenty twenty five, the business should remain profitable, but very likely have margins below the 7% target. We’re working diligently to strengthen our business’ foundation to create higher highs and higher lows across the business cycle.

And finally, we intend to generate and deploy cash across all phases of this cycle. Turning now to our outlook for cash flow drivers. We made progress on reducing working capital levels in 2024, but the gains were well below our expectations. Intense efforts to accelerate our improvement pace, particularly around inventories are underway and we expect to generate more substantial progress in 2025. Overall, we anticipate cash generated from operations to be comparable to strong 2024 levels as working capital improvements generally offset the net income decline.

2025 capital expenditures are expected to range between $40,000,000 and $80,000,000 This wide range of outcomes is due to current economic and geopolitical uncertainty, particularly in The U. S. And in EMEA. We’ll closely monitor spending during the first half of the year and accelerate investments if the market and our share increase as expected. As we continue to generate free cash, we’ll follow our disciplined capital allocation framework to reduce leverage, make strategic investments that support long term profitable growth and continue to generate strong returns for our shareholders.

Now, I’ll turn the call over to Al for his comments.

Al Rankin, Executive Chairman, Hyster Yale: Thanks, Scott. I want to emphasize the significance of the information Rajeev and Scott have shared today. We had a strong 2024 that build upon the previous year’s results, which were robust by historical standards. We exceeded our initial expectations despite a substantial market decline and significant geopolitical uncertainty. This was largely due to our lengthy and margin rich backlog built during the robust lift truck markets of 2022 and 2023.

I’d like to take this opportunity to commend our global team for delivering these strong results. Looking forward, our path forward is guided by sound long term core strategies. I’m confident we have the right team and business structure in place to execute our key strategic programs, whether the near term cyclical downturn, achieve our long term financial goals and provide strong shareholder returns over time. And with that, we’ll take your questions.

Conference Operator: Thank The first question comes from Ted Jackson at Northland Securities. Please go ahead.

Ted Jackson, Analyst, Northland Securities: Thanks. Thanks for taking my questions. Good morning.

Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer, Hyster Yale: Good morning. Good morning.

Rajeev Prasad, Chief Executive Officer, Hyster Yale: So I wanted

Ted Jackson, Analyst, Northland Securities: to start out, Al, I believe last quarter when you had discussed the market outlook for ’25 kind of based off industry data that the view was that, oh, so weaker second half, stronger I mean, first half, a stronger second half and that for the full year of 2025 that the bookings market for lift trucks globally would be more or less flat. When I go through the commentary with regards to the quarter and what you presented, it sounds like that view has tempered somewhat and that the market and a global level maybe will be down. Is that the right way to read the commentary that I’ve gotten from you all? That’s my first question.

Rajeev Prasad, Chief Executive Officer, Hyster Yale: Hi, Ted. It’s Rajeev. I’ll take that question.

Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer, Hyster Yale: I

Rajeev Prasad, Chief Executive Officer, Hyster Yale: think our guidance is pretty consistent with what we said last time. We do expect the first half to be lower, of course, as we’ve stated. But we do see a from our projections, we see an increase in the second half of the year as Scott said. And then we’re going into a pretty good 2026. I think we’ve described why we had the downturn is because of the overbooking we saw in 2022 and 2023, which moderated and then really curtailed in the second half of twenty twenty four.

The other thing that we hadn’t talked about last time is towards the end of the year after our conference call, we saw an increase in cancellations. I assume that was driven by customers really adjusting their demand for the upcoming year. So that we talked a little bit about we brought the production rates below what we had anticipated. And those two elements were the big drivers for it is the market dropped more than we expected and then we got higher cancellations than we were anticipating. So we adjusted for that.

We expect if I just look at the last couple of months, we haven’t seen the same scale of cancellations nowhere near. We have seemed to be back to normal kind of levels. So we expect that to moderate. We still expect the market to be low in the first half, but then come back in the second as some of the orders that were placed prior get and deliveries that have been made get consumed by customers and applied. Does that make sense?

Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer, Hyster Yale: Hello?

Conference Operator: Apologies, we did seem to lose the caller. I can turn it back over to Andrea for any closing comments at this time.

Andrea Seba, Director of Investor Relations and Treasury, Hyster Yale: Thank you for your questions. We’ll now conclude our Q and A session. We thank you for participating. A replay of our call will be available online later today. We’ll also post a transcript on the Hyster Yale website when it becomes available.

If you have any questions, please reach out to me. My contact information is on the earnings release. I hope you enjoy the rest of your day. And now, I’ll turn it back to Joanne to conclude the call.

Conference Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. A replay will be available until 03/05/2025, by dialing 8011111111111111111111111

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