Hudson Technologies HDSN  reported earnings per share (EPS) of 8 cents in fourth-quarter 2023, which beat the Zacks Consensus Estimate of 7 cents. The bottom line declined 27% year over year.

Hudson’s quarterly sales dipped 5.5% year over year to $45 billion. However, the top line beat the consensus estimate of $39.7 billion.

The year-over-year decline in sales was attributed to a 24% decrease in selling prices for certain refrigerants, which offset higher volumes and increased revenues from the Defense Logistics Agency (“DLA”) contract.

Hudson Technologies, Inc. Price, Consensus and EPS Surprise

Hudson Technologies, Inc. price-consensus-eps-surprise-chart | Hudson Technologies, Inc. Quote

Operational Update

The cost of sales declined 4% year over year to $30.9 million. The gross profit was down 9% year over year to $14 million. The gross margin was 31.1% in the quarter compared with the prior-year period’s 32.3%.

Selling, general and administrative expenses rose 13% year over year to $8.5 million. Hudson's operating income in the quarter slumped 33% year over year to $4.7 million. The operating margin was 10.6% compared with 15% in the prior-year quarter.

2023 Performance

EPS plunged 50% year over year to $1.10 in 2023, missing the Zacks Consensus Estimate of $1.14. Sales were down 11% year over year to $289 million owing to lower selling prices for certain refrigerants. The top line surpassed the consensus estimate of $284 million.

The revenue figure for 2023 included $53 million from the company’s DLA contract, which reflected record annual revenues from the contract. HDSN estimates that approximately $20 million of this is related to increased DLA-specific program activities that may not be repeated in 2024.

The company had cash and cash equivalents of $12.4 million at the end of 2023, up from $5.3 million at 2022-end. Hudson generated cash flow from operations of $58.5 million in 2023. The company fully paid off its remaining $32.5 million of term loan debt during the third quarter of 2023 and has no debt on its balance sheet as of Dec 31, 2023.

Outlook

HDSN is expected to gain from the surge in demand for reclaimed refrigerants due to the phasedown of production and consumption of Hydrofluorocarbons (HFCs) in the United States as mandated by the AIM Act. HFCs are potent greenhouse gases used in refrigerators, air conditioners and other applications. The current stepdown in virgin production and consumption constitutes 40% of the baseline for the period from 2024 to 2028.

The proposed Refrigerant Management rule is expected to boost demand for HDSN’s reclaimed refrigerants, given the mandates for their usage in specific sectors. Hudson has been the leader in refrigerant reclamation for nearly three decades and is well-poised to meet this demand.