Hyster-Yale (HY): Give Your Portfolio a (Fork)Lift

Since the company has operated at only about 75% of capacity, management estimates that profits could rise 50% over the next several years if they are able to increase their unit sales of lift trucks by 35% over current levels.
Senior management strives for ongoing innovation. Since 2007, the company produced an 80% improvement in supplier defects per million. It has also introduced a new generation of counterbalanced electric lift trucks and acquired a fuel-cell company to apply the technology to its lift trucks.

The company has an exemplary record in environmental and corporate responsibility. It is a leader in manufacturing zero-emission lift trucks, and it continually works on innovation to alter product design and manufacturing processes to reduce hazardous and solid wastes and energy consumption. HY also has a strong workplace safety record.
The company’s Lift Truck Life Cycle Cost and Carbon Impact Model calculates both life-cycle operating costs and the environmental impacts for various lift-truck power options, including conventional, fast-charge lead-acid and lithium-ion batteries, hydrogen fuel cells, LP gas, and diesel. As far back as 2008, it introduced its Supplier Sustainability Survey to engage its supply chain in sustainability efforts to reduce material waste, energy consumption, and emissions. Also in 2008, the company calculated its first global carbon footprint, and it now sets energy reduction targets.
In addition to its long history of offering zero-emission lift trucks, its internal combustion engine lift trucks have among the lowest emissions in the industry (according to the Environmental Protection Agency and the California Air Resources Board).
Here are several examples of HY’s numerous environmental initiatives.

  • HY developed an electronically-controlled transmission which reduces tire and brake ware, decreasing tire usage by up to 50%. Its regenerative braking system reduces energy usage.
  • Recyclability is key in material selection for lift truck design.
  • At its manufacturing facilities, HY modifies the workweek schedule to reduce the impact of employee commuting (and also promotes carpooling).
  • It recycles batteries, tires, and oil for itself and its customers.

In addition, HY is developing a new line of hydrogen fuel-cell-powered lift trucks and is willing to sacrifice short-term profits to do so. The company plans to introduce its first fuel-cell products later in 2015. Management thinks it is the first major lift-truck company to commit to full deployment of fuel-cell power.
Hyster-Yale is well managed, financially strong, and is a leader in its industry. The stock is selling at a significant discount to other industrial companies and to the broad stock market. Our initial price target for the stock is $76.

Revenues: $2.8 billion
Market Capitalization: $1.1 billion
Earnings Per Share (EPS):
2015 est. $5.00
2016 est. $5.70
Projected 3 – 5 Year Annual Earnings Growth: 7%
Dividend Yield: 1.6%
Stock 52-week Low – High: $62.19 – 108.13
Price/Earnings (2015): 13.2
Risk: Above average
Website: http://www.hyster-yale.com/