Executive Summary / Key Takeaways

• Strategic Transformation Underway: Hyster-Yale is undergoing a significant strategic realignment, pivoting Nuvera's energy solutions towards lithium-ion batteries and mobile charging, while optimizing its global manufacturing footprint to enhance efficiency and reduce costs, with substantial annualized savings projected by 2027.
• Near-Term Headwinds from Tariffs and Cyclicality: The company faces considerable near-term challenges from fluctuating tariffs, which are increasing material and freight costs and creating a temporary lag in cost recovery, alongside a cyclical downturn in lift truck demand exacerbated by prior "overbooking" during the pandemic.
• Financial Performance Deterioration in H1 2025: Q2 2025 saw an operating loss of $8.5 million and a net loss of $13.9 million, driven by lower volumes, reduced overhead absorption, and tariff impacts, leading to a significantly weaker first half compared to the robust performance of 2024.
• Technological Differentiation as a Moat: HY's investment in modular and scalable product designs, focused fuel cell applications, and expanding lithium-ion battery solutions are critical differentiators aimed at improving unit economics, capturing market share in evolving segments like warehouse automation, and building long-term competitive advantage.
• Cautious Outlook with Long-Term Optimism: While full-year 2025 revenues and profits are expected to decline significantly due to tariffs and demand softness, management anticipates sequential improvements in Q3 2025 and substantial benefits from strategic initiatives and recent tax legislation (OBBBA) in the latter half of 2025 and beyond, positioning the company for stronger performance in future market upturns.

Setting the Stage: A Global Powerhouse in Motion

Hyster-Yale, Inc. (NYSE:HY), a Delaware corporation established in 1991, stands as a global leader in the materials handling industry. Operating primarily through its subsidiary, Hyster-Yale Materials Handling, Inc. (HYMH), the company designs, engineers, manufactures, sells, and services a comprehensive line of lift trucks, attachments, and aftermarket parts under the renowned Hyster and Yale brand names. With a manufacturing footprint spanning the United States, Europe, Asia, and Latin America, HY's strategic emphasis on regional production and distribution is a cornerstone of its business model. The company's vision, "to transform the way the world moves materials from Port to Home," underscores its commitment to providing optimal customer solutions and exceptional care.

The materials handling industry is inherently cyclical, with demand for lift trucks fluctuating significantly with global economic activity. Hyster-Yale operates in a competitive landscape dominated by diversified industrial giants and specialized equipment manufacturers. Key direct competitors include Toyota Industries Corporation, Kion Group AG (KGX) (with brands like Linde and Still), Oshkosh Corporation (OSK) (through its JLG segment), and Terex Corporation (TEX). Hyster-Yale's market positioning is characterized by its specialized focus on lift trucks and attachments, contrasting with the broader diversification of some rivals. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Hyster-Yale's established brand names and extensive independent dealer network provide a strong foundation for customer loyalty and recurring aftermarket revenue.

The competitive environment has seen a notable shift with the increased participation of Chinese competitors, who are driving a "recalibration" within the customer base regarding product value and pricing. These entrants, often supported by government resources, are accumulating inventory in various global markets, creating a disruptive short-term dynamic. Hyster-Yale counters this by focusing on its core strengths: product reliability, comprehensive service networks, and a strategic push into advanced technologies.

Technological Edge: Modular Design, Electrification, and Automation

Hyster-Yale's long-term strategy is deeply rooted in technological differentiation, aiming to build a sustainable competitive advantage. The company's modular and scalable product design is a critical differentiator. This innovative approach allows Hyster-Yale to produce the same lift truck models across multiple global facilities, integrating both internal combustion engine (ICE) and electric trucks on the same production lines. This flexibility significantly helps control manufacturing costs, balance production volumes, and enables rapid adaptation to shifting market conditions and customer demands. The global launch of new modular scalable 2-3 ton ICE trucks in 2024, with electric platforms planned for 2025-2026, exemplifies this strategy.

In the realm of electrification, Hyster-Yale is accelerating its focus on next-generation power solutions. The company is actively developing, manufacturing, and commercializing lithium-ion battery modules, chargers, battery management systems, and energy management services. These solutions are deemed "critical" as lithium-ion batteries are expected to increasingly replace traditional lead-acid batteries in electric forklifts. This initiative leverages Hyster-Yale's extensive history in developing electric powertrains, offering customers advanced options to lower their carbon footprint and improve operational efficiency.

Furthermore, Hyster-Yale is making strategic advancements in automation. The company began customer testing for its Relay and ISO Atlas forklifts in 2024. A new platform for automated lift trucks, coupled with an intuitive portal, is slated for launch in early 2025. This development aims to simplify setup and reduce the need for custom programming, offering warehouses a pathway to cut labor and software expenses. These automation solutions are designed to enhance productivity and safety, providing a competitive edge in modern logistics and warehousing.

While the fuel cell business faced a strategic realignment, Hyster-Yale maintains a focused program on hydrogen fuel-cell engines for specific, high-power applications. Nuvera's efforts are now concentrated on finalizing a "high-powered 125-kilowatt fuel cell" for port equipment and larger HydroCharge applications. This technology offers "significantly greater efficiency" for "high productivity large vehicles that consume a huge amount of energy," providing a compelling zero-emission alternative where batteries alone may fall short. The strategic intent is to capitalize on the long-term potential of hydrogen for heavy-duty applications, despite current market challenges related to hydrogen supply constraints.

For investors, these technological advancements are crucial. They form a competitive moat by offering differentiated products that address evolving customer needs for efficiency, sustainability, and automation. This technological leadership contributes to higher average selling prices (ASPs), improved unit economics, and a stronger market position, particularly against competitors who may lag in integrating such advanced solutions. The ability to produce flexible, high-performance equipment across various power sources enhances Hyster-Yale's long-term growth prospects and resilience against market shifts.

Financial Performance: Navigating a Cyclical Downturn

Hyster-Yale's financial performance in the first half of 2025 reflects the significant market crosscurrents and strategic adjustments underway. The second quarter of 2025 saw consolidated revenues decline by 18.1% year-over-year to $956.6 million, primarily due to a decline in unit volume and a shift towards lower-priced lift trucks, particularly in the Americas and EMEA. This revenue contraction, driven by economic uncertainty and weaker industry booking rates since early 2024, led to a stark shift in profitability. The company reported an operating loss of $8.5 million in Q2 2025, a substantial decrease from an operating profit of $95.6 million in the prior-year quarter. Net income also turned to a loss of $13.9 million, compared to a $63.3 million profit in Q2 2024.

For the first six months of 2025, consolidated revenues decreased by 16.1% year-over-year to $1,867.0 million. The operating profit for this period plummeted to $12.8 million from $179.4 million in H1 2024, resulting in a net loss of $5.3 million compared to a $114.8 million profit. This decline in profitability was largely attributable to lower gross profit, stemming from reduced volumes, lower manufacturing overhead absorption rates, and a $10 million impact from tariff-driven material and freight cost increases in Q2 2025 alone.

Segment-wise, the Lift Truck business bore the brunt of the downturn. The Americas segment's operating profit decreased significantly to $11.7 million in Q2 2025 from $92.5 million in Q2 2024, impacted by lower volumes and increased material/freight costs. EMEA and JAPIC segments both reported operating losses, reflecting shifts to lower-margin products, unfavorable pricing, manufacturing inefficiencies, and adverse currency movements. Bolzoni, the attachments segment, also saw its operating profit decrease by 40% year-over-year to $2.4 million in Q2 2025, primarily due to lower unit volumes and reduced overhead absorption, compounded by the strategic phase-out of lower-margin legacy products.

Despite these near-term challenges, 2024 provided a strong foundation, with full-year revenues of $4.3 billion (a 5% improvement year-over-year) and an adjusted operating profit of $267 million, representing a 6% margin—the "strongest full-year performance in the company's history." This robust performance was largely due to a lengthy and margin-rich backlog built during the strong lift truck markets of 2022 and 2023, which cushioned the business from a softening market in late 2024. The current financial performance highlights the company's exposure to market cyclicality and external cost pressures, underscoring the urgency of its strategic transformation.

Strategic Initiatives: Building Resilience for the Future

Hyster-Yale is proactively implementing several strategic initiatives designed to enhance long-term profitability and mitigate the impact of market cyclicality. A pivotal move in Q2 2025 was the strategic realignment of Nuvera Fuel Cells, LLC, which was merged into the HYMH Americas segment. This decision, driven by the fuel cell business's inability to achieve profitability within an acceptable timeframe due to hydrogen supply constraints and a changed political environment, aims to increase near-term profits. The realignment involved a $15 million charge for severance and asset impairment in Q2 2025. It is expected to generate annualized cost savings of $15 million to $20 million starting in the second half of 2025. Additionally, $10 million to $15 million of Nuvera's costs will be absorbed by the Lift Truck business to accelerate the development of lithium-ion batteries and mobile charging products, leveraging Nuvera's technical expertise for broader energy solutions. Initial sales of the HydroCharge mobile hybrid electric charging platform are anticipated in the second half of 2025.

Concurrently, Hyster-Yale is advancing its manufacturing footprint optimization programs, initiated in 2024. These programs are designed to streamline the manufacturing network, optimize operations, lower costs, and reduce inventories and product lead times. The company spent $1.4 million on these efforts in the first half of 2025 and expects to incur an additional $4 million to $7 million through the remainder of 2025, and between $10 million to $23 million in 2026. Once fully implemented by 2027, these programs are projected to generate substantial annualized savings of $30 million to $40 million, which will significantly "insulate the business from future market downturns." This initiative is enabled by the company's expanding lineup of modular and scalable products, allowing for greater production flexibility and efficiency.

To combat volatile input costs, particularly from tariffs, Hyster-Yale has adopted an agile pricing strategy. The company implemented monthly price adjustments in Q2 2025 to quickly reflect actual product costs, raising prices as tariffs increase and lowering them when they decrease. While this approach helps protect profit margins, the company made a strategic choice not to retroactively raise prices on existing backlog or key deals, prioritizing trust with its dealer partners and customers. This decision, however, creates a temporary lag in cost recovery efforts.

Working capital management remains a top priority, with inventory identified as the largest cash improvement opportunity. Despite a combined unfavorable impact of foreign currency and tariffs of approximately $40 million on reported inventory as of June 30, 2025, the company's Q2 inventory decreased by over $60 million year-over-year and $30 million sequentially (excluding these effects). This reflects ongoing efforts to optimize inventory and align production schedules with material availability, aiming for a "healthy multimonth production backlog with reduced working capital levels." The company generated approximately $30 million in operating cash in Q2 2025, reflecting these efforts.

Outlook and Risks: A Path Through Uncertainty

Hyster-Yale's outlook for 2025 is characterized by a blend of caution regarding near-term headwinds and optimism for long-term strategic benefits. The company anticipates modest sequential growth in both revenue and operating profit for Q3 2025, driven by stronger performance in both the Lift Truck and Bolzoni segments. However, the full-year 2025 outlook has deteriorated, with revenues, production levels, and profits expected to be "below robust 2024 results." This revised outlook primarily reflects the "tariff impacts to material cost and a greater than expected decline in demand in the second half of 2025." Analysts project a full-year 2025 EPS of $1.36 (down 84.86% year-over-year) on revenues of $3.69 billion (down 14.29% year-over-year).

Key assumptions underpinning this guidance include U.S. tariffs in effect as of July 9, 2025, the expiration of the Section 301 tariff exemption for lift truck parts by August 31, 2025, and no additional global tariffs. Management explicitly states that "the tariff rate volatility creates uncertainty and makes it difficult to provide a precise impact estimate at this time." Lift Truck bookings declined to $330 million in Q2 2025 from $590 million in Q1 2025, and the backlog stood at $1.7 billion, down from $1.9 billion. While production is expected to increase in the second half of 2025, growth expectations have been moderated due to macroeconomic and tariff pressures. Product margins are anticipated to remain above targeted levels but decline year-over-year due to increased competitive intensity in a softer market.

A significant positive development is the "One Big Beautiful Bill Act" (OBBBA), signed into U.S. law on July 4, 2025. This legislation, which includes provisions for immediate expensing of domestic R&D expenditures and certain qualified capital expenditures, is expected to have a favorable impact on Hyster-Yale's financial results in the second half of 2025, leading to lower tax expense and related cash outflows. This tax reform could partially offset the adverse impacts from tariffs and demand declines.

Hyster-Yale's long-term operating profit target remains at 7% across the business cycle. The company aims to exceed this target during periods of strong demand (as seen in early 2024) and to limit profit degradation during downturns, performing better than in previous cycles. This commitment to "higher highs and higher lows" in profitability is supported by ongoing investments in advanced products, manufacturing efficiencies, and IT system upgrades, with 2025 capital expenditures projected between $50 million and $60 million.

However, significant risks persist. Global trade and geopolitical uncertainty remain "significant variables" that could cause actual results to deviate from current projections. The cyclical low in the industry, exacerbated by the "extraordinary volumes bookings that occurred during COVID," continues to impact demand. The slow customer adoption of hydrogen fuel cells due to supply constraints highlights the challenges in commercializing nascent technologies. Furthermore, competitive intensity, particularly from government-backed Chinese manufacturers, could pressure pricing and market share.

Conclusion

Hyster-Yale, Inc. is at a critical juncture, executing a comprehensive strategic transformation designed to enhance its long-term resilience and profitability. The company's proactive measures, including the pivotal Nuvera realignment, aggressive manufacturing footprint optimization, and a focus on modular, electrified, and automated product lines, are foundational to its vision of revolutionizing materials movement. These initiatives, underpinned by a disciplined capital allocation framework, are aimed at building a more efficient and adaptable organization capable of delivering stronger, more consistent financial results across economic cycles.

While the near-term outlook for 2025 is tempered by significant headwinds from tariff volatility, economic uncertainty, and a cyclical market downturn, Hyster-Yale's technological leadership in modular design, lithium-ion solutions, and focused hydrogen applications provides a crucial competitive moat. The anticipated benefits from strategic cost savings and favorable tax legislation in the latter half of 2025 offer a glimmer of optimism amidst the current challenges. For discerning investors, Hyster-Yale represents a compelling long-term investment thesis, contingent on its ability to successfully navigate these complex market dynamics and fully realize the benefits of its strategic and technological roadmap, ultimately positioning the company for substantial profitable growth in the years ahead.