Image: Hyster-Yale.

Some of the most interesting investment opportunities lurk in unnoticed corners of the market. Forklift manufacturer Hyster-Yale Materials Handling (HY 4.09%) is a good example of a stock that generally hides under the radar, with the company focusing on a relatively narrow part of the industrial sector but working hard to be the best at its business. Coming into Wednesday afternoon's second-quarter financial report, Hyster-Yale shareholders had already seen poor performance in recent months and were hoping that the company would show signs of greater growth. Hyster-Yale's results were mixed, with weaker sales than expected but a solid profit helping to satisfy many investors. Let's look more closely at Hyster-Yale and whether its latest report makes it more likely that the company is on the right path.

Hyster-Yale's bottom line gets a boost
Hyster-Yale's first-quarter results didn't give investors everything they wanted to see, but it still provided some good news. Revenue declined a greater than expected 3.8% to $658.7 million, again falling short of the more modest 2% loss that those following the company had wanted to see. Net income also fell sharply, with a 31% decline to $22.7 million, but much of that drop was due to a substantial gain in the year-earlier quarter. After adjusting for that one-time gain, earnings of $1.39 per share were actually almost 10% higher than Hyster-Yale posted in the second quarter of 2014, and were well above the $0.97 per share consensus estimate among investors.

Looking more closely at Hyster-Yale's lift-truck business, the company has overcome some considerable obstacles. The strong dollar continues to drag on the forklift-maker's revenue, with Hyster-Yale estimating that currency impacts cost the company about $46 million in lost revenue. In addition, weakness in the Brazilian economy hurt overall shipment volumes there, and that has been a considerable source of business for Hyster-Yale.

Hyster-Yale's bookings and backlog figures were mixed. Bookings fell by 200 units to 21,400, and in terms of their dollar value, $495 million was down about 12% from year-ago levels. Worldwide backlog climbed by 2,100 units, or 7%, compared to last year's second quarter, but weak foreign currencies actually led to a decline in the total dollar value of that backlog, falling $30 million to $715 million.

Moreover, the Nuvera fuel-cell business unit continued to weigh on Hyster-Yale's overall profitability. Operating losses of $5.9 million produced a net loss of $3.5 million, as the unit had only $400,000 of revenue during the quarter. Hyster-Yale is patient about the ramp-up period for the fuel-cell unit, but investors need to remain patient as it could take a while for the business to produce positive results.

What's ahead for Hyster-Yale?
Looking forward, Hyster-Yale is still worried about its near-term future. It expects to see global-market for forklifts in the second half of the year, with particular weakness in Brazil and challenging conditions in Europe and China. Even with a poor macroeconomic outlook, Hyster-Yale thinks it can achieve further increases in shipments of forklift units and replacement parts during the remainder of the year. It believes North America and Europe will be strongest, with the Asia-Pacific region also contributing to growth. Yet because the strength in the dollar has continued, further revenue weakness could persist, although lower costs for materials should keep operating profits for the segment fairly stable.

Meanwhile, with Nuvera, Hyster-Yale is still committed to substantial capital investment in the fuel-cell opportunity there. It believes that the unit will lose another $7.5 million to $8.5 million in the second half of the year as it works on commercializing its technology and integrating it into Hyster-Yale products. Operating losses over the next few years could climb into the $40 million to $50 million range, and the company set a goal of reaching break-even run rates by 2017. In the long run, though, Hyster-Yale still sees Nuvera as valuable in giving customers an alternative to traditional forklifts, and competition on that front has made it important for Hyster-Yale to respond with a solution of its own.

Hyster-Yale doesn't draw the attention of after-hours traders, and so its stock didn't react immediately to its announcement. For long-term investors, Hyster-Yale is doing its best to work through some tough situations globally, and if it can succeed, improving economic conditions worldwide could give it the cyclical boost it needs to get sales moving back in the right direction.