HBB Shares Rise 6.7% Despite Y/Y Earnings Decline in Q4

Shares of Hamilton Beach Brands Holding Company HBB have outperformed the broader market, following the release of its fourth-quarter 2025 results. The stock has climbed 6.7% since reporting earnings compared with a 0.8% return for the S&P 500. Over the past month, Hamilton Beach shares have risen 7.7%, while the S&P 500 has declined 0.9%, signaling a favorable investor response to the company’s latest update.

Earnings & Revenue Performance

For the fourth quarter of 2025, revenues were $212.9 million compared with $213.5 million in the year-ago quarter. The gross margin expanded 220 basis points to 28.3% from 26.1%, lifting operating profit 8% to $25.4 million from $23.6 million. However, diluted earnings per share declined to $1.38 from $1.75, reflecting a less favorable tax comparison.

For 2025, revenues fell 7.3% to $606.9 million from $654.7 million in 2024. The gross margin slipped 30 basis points to 25.7% from 26%, while operating profit decreased 15.3% to $36.6 million from $43.2 million. Full-year diluted EPS declined to $1.95 from $2.20.

Hamilton Beach Brands Holding Company Price, Consensus and EPS Surprise

 

Hamilton Beach Brands Holding Company price-consensus-eps-surprise-chart | Hamilton Beach Brands Holding Company Quote

Segment Trends & Margin Drivers

Fourth-quarter revenue stability masked divergent segment trends. Growth in the Commercial and Health businesses offset lower volumes in the U.S. Consumer segment. Gross profit rose to $60.2 million from $55.8 million, aided by a favorable product and customer mix tied to higher-margin Commercial and Health sales, along with labor and logistics efficiencies, and pricing benefits.

Selling, general and administrative expenses increased to $34.7 million from $32.1 million, reflecting higher performance-based compensation, $1.5 million in incremental advertising, and $1.6 million tied to the write-off and accelerated depreciation of a legacy ERP system. These investments tempered some of the gross margin gains.

For 2025, lower U.S. Consumer volumes, particularly in the second and third quarters, as retailers paused buying amid tariff uncertainty, led to the revenue decline. A one-time $5.3-million incremental tariff cost reduced the gross margin by 90 basis points. Notably, income before taxes rose to $35.6 million from $33.4 million, but net income fell to $26.5 million from $30.8 million due in part to a higher effective tax rate compared with a tax-benefit period in 2024.

Cash Flow & Balance Sheet

The operating cash flow declined sharply to $13.8 million in 2025 from $65.4 million in 2024 due to working capital changes, including lower accounts payable as prior-year inventory builds normalized. The company ended the year with total debt of $50 million and a net debt position of $2.7 million against net cash of $0.6 million a year earlier.

Hamilton Beach repurchased approximately 506,925 shares for $9 million and paid out $6.4 million in dividends during 2025, underscoring its continued capital return strategy despite earnings pressure.

Management Commentary & Strategic Initiatives

Management characterized the fourth quarter as a meaningful step in recovering from tariff-related disruptions. Strategic actions during 2025 included diversifying the sourcing base, implementing selective price increases and expanding the higher-margin Commercial and Health segments. The company also emphasized growth in premium offerings, including the Lotus brand, and further penetration in food service and healthcare markets, positioning these areas as long-term growth drivers.

2026 Outlook

For 2026, Hamilton Beach expects revenue growth to approach the mid-single-digit range, assuming a more stable U.S. operating environment. The gross margin is projected to be similar to or slightly better than the 2025 reported level.

However, operating profit on a reported basis is expected to decline in the low-teen percentage, indicating $6 million in incremental advertising investment and $6 million in accelerated depreciation tied to the ERP transition. The cash flow from operations less investing activities is forecast to be $35-$45 million, supported by the normalization of tariff-related working capital impacts.

Other Developments

The company noted the expiration of its Bartesian licensing agreement at the end of 2025, which will partially offset 2026 revenue growth. In addition, management is transitioning from its legacy ERP system, resulting in accelerated depreciation charges but aimed at enabling long-term operational and technological benefits.

Overall, Hamilton Beach closed a challenging year, marked by tariff volatility with improving quarterly trends, expanding margins in the latest period and a growth-oriented investment plan for 2026, though near-term profit will be weighed by stepped-up spending and technology transition costs.

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This article originally published on Zacks Investment Research (zacks.com).

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