Holley Inc. (HLLY) operates as a designer, manufacturer, and marketer of automotive aftermarket products for car and truck enthusiasts internationally. The company’s products span various automotive platforms and sell across multiple channels. In the recently reported quarter, the company posted net sales of $134.04 million, and its adjusted gross profit was $52.31 million.
Recently, the company expanded its presence at the annual Specialty Equipment Market Association (SEMA) show with a larger showcase space, demonstrating its global leadership in the automotive performance aftermarket. With its portfolio of over 70 top brands, HLLY’s SEMA booth featured innovative and cutting-edge platform solutions designed for automotive enthusiasts.
During the third quarter, Holley expanded its innovative product portfolio through brands like Baer Brakes and Simpson. Baer Brakes released Baer BIG Claw Performance Brake Kits and Baer Claw Rotors, which improve the vehicle's stopping power and elevate the overall style, look, and feel. Also, Simpson launched its Devil Ray 3.0 and Desert Devil 3.0 racing and off-road helmets.
These innovations continue reinstating Holley's position in the high-performance automotive aftermarket industry, widening its product offerings and market share. Also, in the last reported quarter, the company achieved growth in significant areas of the business and financial operations, including a 16% year-over-year increase in its direct-to-consumer channel through its well-executed marketing calendar.
Matthew Stevenson, President and CEO of Holley, commented, "We continued our progress in our organizational transformation through the third quarter and are encouraged by the immediate impact that our new team members have made in their short time here. Of note, digital modernization and customer service optimization, B2B sales capabilities, new and targeted product launches, and revamped pricing strategy have all been upgraded within the last year and are well positioned to drive our organic growth engine.”
According to the fiscal 2024 fourth-quarter outlook, HLLY expects net sales between $133 million and $143 million. The company’s adjusted EBITDA is expected to range from $24 million to $29 million.
For the full fiscal year, the company has its net sales guidance between $595 million and $605 million. Its adjusted EBITDA is expected to be $115 million - $120 million.
Shares of HLLY have surged 1.5% over the past month to close its last trading session at $2.76.
Let’s look at factors that could influence HLLY’s performance in the upcoming months.
Positive Recent Development
On October 15, HLLY’s Flowmaster launched the Flowmaster Signature Series, the brand's new premium exhaust line. It is engineered for increased power and performance. The next-generation exhaust system provides a finely tuned sound and features brushed stainless steel for a clean, high-end look that resists premature rusting.
The Flowmaster Signature Series reflects HLLY's commitment to delivering performance, safety, fun, and excitement to automotive enthusiasts. It is made of top-line materials and delivers significant gains in power and torque over stock exhaust systems. The Signature Series also features a unique, user-friendly design, allowing simple at-home installation.
Also, on September 26, HLLY's Baer Brakes launched Baer BIG Claw Performance Brake Kits and Baer Claw Rotors. They are designed for modern truck enthusiasts to improve a vehicle's stopping power and elevate the overall style, look, and feel. Popular vehicle fitments for the new Baer products include the Ford F-150, Ford Bronco, Ram Trucks, Jeep JL/JT, Chevrolet Silverado 1500, and Chevrolet Suburban.
Robust Financials
HLLY reported net sales of $462.17 million during the nine months that ended September 29, 2024, and its adjusted gross profit was $183.49 million. The company’s adjusted EBITDA came in at $118.71 million for the period.
In addition, the company’s adjusted net income came in at $12.25 million and $0.10 per share for the period, respectively. Also, its free cash flow was $40.05 million.
Furthermore, the company’s cash and cash equivalents stood at $50.75 million as of September 30, 2024, compared to $41.08 million as of December 31, 2023.
Low Valuation
In terms of forward EV/EBITDA, HLLY is currently trading at 7.48x, 28.7% lower than the industry average of 10.49x. The stock’s forward P/E of 19.71x is considerably lower than the industry average of 19.83x.
Additionally, the stock’s forward EV/EBIT and Price/Sales of 13.77x and 0.53x are 14% and 46.3% lower than the industry averages of 16.01x and 1x, respectively.
Favorable Analyst Estimates
Analysts expect HLLY’s revenue for the second quarter (ending June 2025) to increase 3.5% year-over-year to $175.37 million. The consensus EPS estimate of $0.12 for the same quarter indicates a 15.7% year-over-year improvement.
For the fiscal year ending December 2025, the company’s revenue and EPS are expected to grow 4.1% and 170.4% year-over-year to $631.79 million and $0.30, respectively.
High Profitability
HLLY’s trailing-12-month EBIT margin of 11.62% is 42.1% higher than the industry average of 8.17%. Its trailing 12-month gross profit margin of 38.02% is higher than the industry average of 37.57%. Similarly, its trailing 12-month levered FCF margin of 11.85% is 144.6% higher than the industry average of 4.84%.
POWR Ratings Reflect Promise
HLLY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. HLLY has a B grade for Value, which is in sync with the company’s lower valuation.
In addition, the stock has a B grade for Quality, consistent with its higher-than-industry profitability.
HLLY is ranked #6 in the 60-stock B-rated Auto Parts industry.
Beyond what I have stated above, we have also given HLLY grades for Sentiment, Growth, Momentum, and Stability. Get access to all the HLLY Ratings here.
Bottom Line
HLLY is a leading automotive aftermarket products manufacturer and provider. The company recently reported solid earnings for the third quarter of fiscal 2024. The company’s strong industry footing, strategic initiatives, expanding product portfolio, and solid financial performance position it for bright long-term prospects. So, this stock could be an ideal buy now.
How Does Holley Inc. (HLLY) Stack Up Against Its Peers?
While HLLY has an overall POWR Rating of B, investors could also check out these other stocks within the B-rated Auto Parts industry with A (Strong Buy) or B (Buy) ratings:
Ituran Location & Control Ltd. (ITRN)
Allison Transmission Holdings, Inc. (ALSN)
Compagnie Generale des Etablissements Michelin ADR (MGDDY).
For exploring more A and B-rated auto parts stocks, click here.
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HLLY shares were trading at $2.78 per share on Monday afternoon, up $0.02 (+0.72%). Year-to-date, HLLY has declined -42.92%, versus a 26.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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