Hayward Holdings ( NYSE: HAYW ) rose as much as 13% on Wednesday after analysts at Jefferies upgraded the maker of swimming-pool equipment to Buy from a previous investment rating of Hold. They said Hayward ( HAYW ) has the potential to boost profits after facing economic hurdles in 2023.
Hayward ( HAYW ) is a high-quality business with a large installed base and aftermarket exposure that should deliver double-digit earnings growth through the cycle,” Saree Boroditsky, analyst at Jefferies, said in a January 4 report. “While we see negative earnings revisions in the near term, the long-term earnings power supports a higher valuation.”
About 80% of pool equipment sales come from customers who already own a pool, and the average age of U.S. pools is about 23 years. Hayward ( HAYW ) is poised to benefit as customers spend on replacing and upgrading equipment such as water pumps, according to Jefferies. Hayward ( HAYW ) also is buying back stock, which supports the share price.
Jefferies raised its price target for Hayward ( HAYW ) to $15 a share from $9.50 a share, based on a multiple of 14 times estimated EBITDA for 2025 discounted at 10%.
“The company was a clear beneficiary of the stay-at-home trend, and we expect to see significant declines in 2023 from a weaker consumer backdrop and inventory destocking,” according to Jefferies. “That said, we believe the current valuation is attractive given the long-term growth algorithm and potential benefit from share repurchases.”
Hayward's ( HAYW ) stock fell 60% in the 12-month period through January 3, compared with a 16% decline for the Standard & Poor's 400 midcap stock index ( SP400 ).
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Hayward jumps as Jefferies upgrades pool-equipment firm to Buy