Hyster-Yale Materials Handling (HY)

Lift truck and material handling solutions manufacturer Hyster-Yale Materials Handling (NYSE:HY) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 13.8% year on year to $910.4 million. Its non-GAAP profit of $0.49 per share was in line with analysts’ consensus estimates.

Company Overview

Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE:HY) designs, manufactures, and sells materials handling equipment to various sectors.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Toyota Material Handling (NYSE:TM), Crown Holdings (NYSE:CCK), and CLARK Material Handling (private).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Hyster-Yale Materials Handling’s 5.1% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Hyster-Yale Materials Handling’s annualized revenue growth of 5.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Hyster-Yale Materials Handling missed Wall Street’s estimates and reported a rather uninspiring 13.8% year-on-year revenue decline, generating $910.4 million of revenue.

Looking ahead, sell-side analysts expect revenue to decline by 5.1% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will face some demand challenges.

Hyster-Yale Materials Handling has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 16.6% gross margin over the last five years. That means Hyster-Yale Materials Handling paid its suppliers a lot of money ($83.41 for every $100 in revenue) to run its business.

This quarter, Hyster-Yale Materials Handling’s gross profit margin was 19.5%, down 2.8 percentage points year on year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Hyster-Yale Materials Handling was profitable over the last five years but held back by its large cost base. Its average operating margin of 2% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Hyster-Yale Materials Handling’s operating margin rose by 3.8 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Hyster-Yale Materials Handling generated an operating profit margin of 2.3%, down 5.6 percentage points year on year. Since Hyster-Yale Materials Handling’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Hyster-Yale Materials Handling’s EPS grew at an astounding 19.3% compounded annual growth rate over the last five years, higher than its 5.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Hyster-Yale Materials Handling’s earnings to better understand the drivers of its performance. As we mentioned earlier, Hyster-Yale Materials Handling’s operating margin declined this quarter but expanded by 3.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Hyster-Yale Materials Handling, its two-year annual EPS growth of 161% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q1, Hyster-Yale Materials Handling reported EPS at $0.49, down from $2.93 in the same quarter last year. This print was close to analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hyster-Yale Materials Handling broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

Taking a step back, we can see that Hyster-Yale Materials Handling’s margin dropped by 5.5 percentage points during that time. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Hyster-Yale Materials Handling historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.1%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Hyster-Yale Materials Handling’s ROIC has increased significantly over the last few years. This is a good sign, and we hope the company can continue improving.

Hyster-Yale Materials Handling reported $77.2 million of cash and $484 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $257.6 million of EBITDA over the last 12 months, we view Hyster-Yale Materials Handling’s 1.6× net-debt-to-EBITDA ratio as safe. We also see its $17.2 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 2.5% to $39.50 immediately following the results.

Updated: May 22, 2025 at 11:04 PM EDT

Before investing in or passing on Hyster-Yale Materials Handling, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Hyster-Yale Materials Handling isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking. On top of that, its low free cash flow margins give it little breathing room.

Hyster-Yale Materials Handling’s EV-to-EBITDA ratio based on the next 12 months is 4.6x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $56 on the company (compared to the current share price of $40.54).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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