Unlocking Tariff-Related Gains with Hudson Technologies

Hudson Technologies (NASDAQ:HDSN) is a US-based refrigerant services company with a market capitalization below $500 million. The company is seen as an exception in a portfolio dominated by high-quality blue chips in concentrated industries. Hudson's business is focused on refrigerant services, which could be a beneficiary of tariffs imposed on imported refrigerants. The company's relatively low market capitalization and potential exposure to tariffs make it an attractive play for investors seeking a spread bet.

Hudson Technologies (NASDAQ:HDSN), a US-based refrigerant services company with a market capitalization below $500 million, stands out as an exception in a portfolio dominated by high-quality blue chips in concentrated industries. The company's focus on refrigerant services positions it as a potential beneficiary of tariffs imposed on imported refrigerants. This article explores the investment potential of Hudson Technologies, highlighting its unique position in the market and the impact of tariffs on its operations and profitability.

Market Position and Business Model

Hudson Technologies specializes in refrigerant reclamation, holding a significant market share in the United States. With a proprietary patent protecting its Zugibeast machine, the company currently holds 35% of the reclamation market and is the only player with an extensive reach throughout the country. Its business model involves selling reclaimed refrigerants either to wholesalers or directly to end users, such as industrial facilities and supermarkets [1].

Impact of Tariffs

The company's exposure to tariffs is twofold. Firstly, some refrigerants are imported, and tariffs on these could impact the cost of sourcing virgin refrigerants. Secondly, refrigerant cylinders are made of steel, and tariffs on steel could increase the cost of these cylinders. However, the positive aspect for Hudson is that it sources all its recovered refrigerants domestically, which means it is not directly affected by tariffs on imported refrigerants. Instead, the company benefits from the price increases due to tariffs on imported refrigerants, as it can sell its reclaimed refrigerants at a higher price, capturing the spread between the price it paid to collect used refrigerants and the market price it can sell the reclaimed product at [1].

Financial Performance and Valuation

Hudson Technologies reported its second-quarter 2025 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $0.23, compared to the forecasted $0.16. This represents a 43.75% surprise, driven by robust revenue of $72.8 million, which also exceeded projections. The company maintained a strong cash position with no debt and continued to expand in the A2L refrigerant market [3].

The company's valuation appears to be somewhat expensive, trading at a forward price-to-earnings (PE) ratio of 21 and a price-to-free cash flow (P/FCF) of 6. However, the company's cyclical nature, driven by the commodity it is exposed to, suggests that it could experience significant growth in the coming years if commodity prices continue to rise. Analysts expect $240 million in revenue this year and only $260 million next year, but the company's strong performance in Q2 2025 suggests that it could exceed these expectations [3].

Conclusion

Hudson Technologies presents an attractive investment opportunity for investors seeking a spread bet in the refrigerant market. The company's unique position in the market, its exposure to tariffs, and its strong financial performance make it a compelling play. However, investors should be aware of the company's cyclical nature and the potential risks associated with commodity price fluctuations.

References

[1] https://seekingalpha.com/article/4808491-hudson-technologies-the-perfect-tariff-spread-play-you-should-consider
[2] https://seekingalpha.com/article/4808491-hudson-technologies-the-perfect-tariff-spread-play-you-should-consider?source=affiliate_program:stockanalysis.com&utm_medium=affiliate&utm_source=stockanalysis.com&affid=858&oid=16&transaction=a021dc6eab0c4129afa07bd26190a462
[3] https://www.investing.com/news/transcripts/earnings-call-transcript-hudson-technologies-beats-q2-2025-earnings-expectations-93CH-4161498