It's been a volatile few years for pool and outdoor living technology company Hayward Holdings(NYSE: HAYW), but investors were feeling good about the stock today after a positive set of earnings sent the stock up 16% by 11 a.m.
Peers like Pentair and Pool Corp. were darlings of the market when the pandemic hit and lockdown measures brought about a boom in spending on recreational activity at home. Their soaring profitability and valuations encouraged Hayward Holdings to the market in 2021, only for all three of these stocks to start being sold off in 2022 as the market started pricing in the inevitable slowdown from previous torrid rates of growth.
Higher interest rates didn't help, either
A natural sales correction was compounded by a rising rate environment and pressure on consumer discretionary spending, and it was no surprise to see Hayward Holdings reporting a sales decline in its full-year earnings release today.
The market liked today's earnings and guidance
However, what was a surprise was the magnitude of the decline -- it was less than the market had expected. While sales declined 24% for the full year, they increased 8% in the same quarter of 2023, reminding investors that the downturn in its end markets won't last forever.
Image source: Getty Images.
Management believes its net sales will rise 2%-7% in 2024, with adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) in the range of $255 million to $275 million, representing an increase of 3.1%-11.2% in 2023.
A stock to buy ahead of interest rate cuts
Lower interest rates will boost discretionary spending on the home and push the company toward the higher end of the guidance ranges. That makes Hayward Holdings an interesting stock for investors anticipating the Federal Reserve cutting rates later in the year.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
