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Shares of Hyster-Yale Materials Handling, Inc. (HY - Snapshot Report)>HY) reached their highest level of $49.72 on December 24 after the company was spun off from Nacco Industries, Inc. (NC) and began trading as an independent public company on October 1. This manufacturer of materials handling trucks posted a 42% increase in profits in the third quarter of the year driven by improved gross margins. With this, the company has delivered an impressive earnings surprise of 49.5% and achieved a Zacks #1 Rank (Strong Buy) based on strong estimate revisions.

Strong Earnings Growth

On November 1, Hyster-Yale's third quarter profits increased to $24.9 million or $1.48 per share from $17.5 million or $1.04 in the prior year quarter, beating the Zacks Consensus Estimate of 99 cents. The increase in profits was mainly attributable to price increases in Europe and Americas and a favorable shift in sales mix to higher-margin products in Europe and Americas.

Further, the company's earnings were also boosted by favorable foreign currency movements, which lowered the import cost of trucks and components from countries that used the weakened euro and British pound. It was also favorable impacted by higher equity earnings of company-owned joint venture NMHG Financial Services, Inc., and lower interest expense.

Revenues declined 6.9% to $585.6 million. However, operating profit grew 17.4% to $28.3 million from $24.1 million in the 2011-quarter, while operating margins improved to 4.8% from 3.8% in the prior year.

Hyster-Yale expects growth in the global lift truck market to continue to moderate in the fourth quarter of 2012. The company also expects growth in the global truck market in 2013 based on higher volumes in the Americas, driven by moderate growth in Brazil and Latin America, and moderate growth in the Asia-Pacific, Middle East and Africa markets.

Estimates Moving Higher

The Zacks Consensus Estimate for 2012 grew 12.5% in the past two months to $4.95 per share. As for 2013, the Zacks Consensus Estimate rose 7.1% to $4.50 in the same timeframe.

Valuation is Reasonable

Hyster-Yale's valuation is reasonable. The company currently trades at a forward P/E of 9.5x, a discount of 30% compared to the peer group average of 13.6x. The company's price-to-sales (P/S) ratio of 0.3 is also at a discount of 40% compared to the peer group average of 0.5.

Company Description

Based in Cleveland, Ohio, Hyster-Yale Materials Handling, Inc. designs and manufactures a comprehensive line of materials handling or lift trucks and aftermarket parts. The $407 million company's products are marketed under the Hyster and Yale brand names globally. It was spun off from its parent company NACCO Industries on September 28. Its lift trucks and component parts are manufactured in the U.S., Northern Ireland, Mexico, The Netherlands, the Philippines, Italy, Japan, Vietnam, Brazil and China.

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