Hurco Grinding Toward A Recovery, But In Fits And Starts

2025-01-10 17:37:28 ET

Summary

• Hurco faced a challenging 2024 with weak demand among its smaller manufacturing customer base, with higher interest rates and election uncertainties, leading to reduced capital spending.
• Hurco's exposure to smaller manufacturers and European markets led to a significant peak-to-trough decline, but orders seem to be stabilizing ahead of end-market recoveries around mid-2025.
• Hurco has leverage to ongoing manufacturing reshoring, and the company's automation tools can help its smaller customers become more productive, but this is not a buy-and-hold idea.
• Double-digit revenue growth and expanded margins in FY'25/'26 on a short-cycle recovery can support a fair value above $20, but this is a high-risk play on a short-cycle recovery.

I expected 2024 to be ugly for Hurco ( HURC ), and indeed it was. With weak demand across a range of manufacturing end-markets, higher interest rates, and a host of uncertainties around the U.S. election cycle, companies across a range of industrial and manufacturing markets slammed the brakes on capital spending, particularly the smaller companies that Hurco caters to, leading to meaningfully weaker demand for the machine tools that Hurco sells....

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