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Hyster-Yale Misses on Earnings, Shares Fall

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Shares of Hyster-Yale Materials Handling, Inc. (HY) have dropped 5% since it reported a 5.4% decline in its third-quarter 2013 earnings to $1.40 per share on Oct 30. The year-over-year decline was led by higher income tax expense. The result also missed the Zacks Consensus Estimate of $1.48.

Operational Updates

Revenues in the reported quarter increased 10% year over year to $643.9 million driven by rise in unit volumes and other revenue. Higher prices also supported revenue growth, partly offset by unfavorable foreign currency movements. Revenues, however, fell short of the Zacks Consensus Estimate of $662 million.

Revenues grew 18% year over year to $448.6 million in the Americas segment, due to positive effect of unit price increase, rise in shipments and growth in parts sale. However, sales in the Europe segment declined 1% to $147 million from $148.6 million in the year ago quarter. Revenues in the Asia-Pacific region were $48.3 million, down from $57.8 million in the year-ago quarter.

Cost of sales was $532.3 million in the third quarter compared with $485.6 million a year ago. Gross profit increased 11.6% year over year to $111.6 million. Gross margin remained flat at 17% year over year.

Selling, general and administrative expenses increased 12% year over year to $80 million. Operating profit in the reported quarter grew 10.6% year over year to $31 million, while operating margin remained flat at 4.8%.

Backlog

Worldwide backlog was around 28,400 units as of Sep 30, 2013 compared with 25,600 units as of Sep 30, 2012. In the third quarter of 2013, worldwide new unit shipments were 21,200 units compared with 18,000 units in the third quarter of 2012.

Financial Update

Hyster-Yale ended the quarter with cash of $184.7 million and debt of $121.8 million. Cash flow from operating activities for the nine-month period ended Sep 30, 2013 increased to $88.8 million from $68.7 million in the prior-year comparable period.

Outlook

Hyster-Yale expects the global market to grow moderately in the remainder of 2013 and in 2014, due to increases in the Chinese market, steady growth in Brazil and continuing recovery in North American demand. Modest growth in the Asia-Pacific, Middle East and African markets will also support the growth.

Even though Latin America market is expected to remain weak in the fourth quarter of 2013, it is expected to recover in 2014. Hyster-Yale anticipates the demand in Europe to remain weak due to volatile macroeconomic conditions.

Hyster-Yale anticipates an overall increase in shipments and parts volumes in all markets in the fourth quarter of 2013 and in 2014. However, material costs are expected to increase marginally.

Operating profit for the fourth quarter is estimated to increase moderately compared to 2012. This is because of an expected increase in unit volumes, unit prices and improved manufacturing efficiencies, offset by a shift in mix to lower-margin products and higher operating expenses. Net income in the fourth quarter of 2013 is expected to fall in comparison to the prior-year quarter. The company anticipates an increase in capital expenditures in 2013, largely due to information technology improvement in Brazil.

Cleveland, Ohio-based Hyster-Yale, designs, engineers, manufactures, sells and services a comprehensive line of lift trucks and aftermarket parts. Hyster-Yale currently carries a Zacks Rank #3 (Hold).

Key Technology, Inc. which belongs to the same industry is expected to announce its fiscal 2013 and fourth quarter results (ended Sep 30, 2013) on Nov 14. The Zacks Consensus Estimate for the company currently stands at 10 cents, reflecting an annual growth of negative 53.03%.

Peer Performance

Columbus McKinnon Corporation’s (CMCO - Snapshot Report) second quarter earnings for fiscal 2014 (ended Sep 30, 2013) declined 14% year over year to 36 cents per share. However, earnings surpassed the Zacks Consensus Estimate of 31 cents. Another competitor, W.W. Grainger, Inc. (GWW - Analyst Report) reported third-quarter 2013 earnings per share of $2.95, up 5% from adjusted earnings of $2.81 per share in the year-ago quarter. However, the earnings fell short of the Zacks Consensus Estimate of $3.08.

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