Lift truck and material handling solutions manufacturer Hyster-Yale Materials Handling (NYSE:HY) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, with sales up 3.9% year on year to $1.07 billion. Its non-GAAP profit of $1.47 per share was 5.4% above analysts’ consensus estimates.

Is now the time to buy Hyster-Yale Materials Handling? Find out in our full research report.

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.

Professional Tools and Equipment

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.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Hyster-Yale Materials Handling grew its sales at a tepid 5.5% compounded annual growth rate. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Hyster-Yale Materials Handling’s annualized revenue growth of 10.2% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

This quarter, Hyster-Yale Materials Handling reported modest year-on-year revenue growth of 3.9% but beat Wall Street’s estimates by 4.4%.

Looking ahead, sell-side analysts expect revenue to decline by 5.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

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 4.1 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Hyster-Yale Materials Handling generated an operating profit margin of 3%, down 1.7 percentage points year on year. Since Hyster-Yale Materials Handling’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Hyster-Yale Materials Handling’s EPS grew at an astounding 35.2% compounded annual growth rate over the last five years, higher than its 5.5% 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 4.1 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 101% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Hyster-Yale Materials Handling reported EPS at $1.47, up from $1.43 in the same quarter last year. This print beat analysts’ estimates by 5.4%. Over the next 12 months, Wall Street expects Hyster-Yale Materials Handling’s full-year EPS of $8.95 to shrink by 40.6%.

Key Takeaways from Hyster-Yale Materials Handling’s Q4 Results

We were impressed by how significantly Hyster-Yale Materials Handling blew past analysts’ revenue and EBITDA expectations this quarter. We were also excited its EPS outperformed. Zooming out, we think this was a good quarter with some key areas of upside, but shares traded down 3.5% to $50 immediately following the results.

Is Hyster-Yale Materials Handling an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.