Hudson Technologies (HDSN) Sees Continued Momentum as Hot Summer Weather Lingers - Roth Capital
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Roth Capital affirms Hudson Technologies (Nasdaq: HDSN) with a Buy rating and $7.50 price target following recent Q2 results.
Analyst Gerry Sweeney noted strong post-Q2 trading in Hudson Tech and attributed it to the following: 1) long, hot summer weather especially in mid-West and Northeast; 2) increasing R-22 scarcity in the market ; 3) its recent addition to financial publication recommendation and momentum screens, which is likely shorter term in nature.
Sweeney elaborated on the key points:
- Market scarcity of R-22 is becoming increasingly apparent – lifting prices. As noted in our last series of channel checks in mid-July, pricing for R-22 was $14+ per pound and moving higher (at 2Q results release Hudson indicated $15 per pound). The EPA mandated production drawdown is taking effect on supplies as it was also indicated in our checks that major chemical producers had fully allocated supplies by late June / early July. With additional drawdowns in 2017, we expect an earlier “sell out” of gas. Finally, one of our channel contacts just indicated producers were beginning to prep the market for “a steep price increase in 2017.” See our quarterly and channel check notes for pricing and production quotas: 2Q16 Results / Channel Checks
- The long, hot summer has kept equipment running longer, requiring additional repairs. Traditionally mid to late July the HVAC industries shift into “heating season” mode. The majority of R-22 sales occur from February (pre-buy) through June. However, the longer, hotter summer has likely pushed equipment requiring more repairs. Further, the increasing price of R-22 may have lowered HVAC companies' desire to carry R-22 inventory. This may be driving additional sales into 3Q than in previous years; however, 2Q remains by far the strongest quarter of the year with 4Q the slowest by far.
- Hudson has caught the eye of momentum ratings and a recent write up in a long-running newsletter. Buying begets buying and this week’s addition to a longstanding investment newsletter has likely added short term momentum to the stock.
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