Key Highlights

  • Equipment rental revenue rose 12% to USD 1.254 billion, while total revenue rose 5% to USD 1.364 billion.
  • Net income rose to USD 104 million from USD 30 million, and adjusted EBITDA rose 9% to USD 603 million.
  • Adjusted EBITDA margin was 44.2%, up 190 basis points, and dollar utilization improved 360 basis points to 43.5%.
  • Adjusted EBITDA guidance rose to USD 2.10 billion to 2.15 billion, and Aaron Birnbaum becomes chief executive on Jan. 1.

Rental Growth After H&E Integration

Herc Holdings (NYSE:HRI) reported third-quarter equipment rental revenue of USD 1.254 billion on Tuesday, up 12% from USD 1.122 billion on growth in fleet on rent for mega projects, delivery and refuel revenue and acquisition revenue synergies. Total revenue rose 5% to USD 1.364 billion because sales of rental equipment fell 44% to USD 85 million, after elevated disposals a year earlier to optimize the fleet following the H&E Equipment Services acquisition. The margin on those sales was 20% against 11%.

Net income was USD 104 million against USD 30 million, and adjusted net income was USD 131 million, or USD 3.91 per diluted share, against USD 74 million and USD 2.22. Adjusted EBITDA rose 9% to USD 603 million, a 44.2% margin. Nine-month revenue was USD 3.707 billion, up 17%, and nine-month net income was USD 99 million against a loss of USD 23 million.

Management said the H&E integration is complete, with expanded scale and a larger sales force.

Costs, Fleet and Leverage

Direct operating expenses were 42.4% of rental revenue against 41.6%, with higher fuel and delivery costs of USD 21 million and USD 10 million and USD 7 million more in field incentive pay. Selling, general and administrative expense fell to 14.2% of rental revenue from 14.8%. Transaction expenses dropped to USD 1 million from USD 38 million, and net interest expense fell to USD 126 million from USD 134 million.

Specialty equipment reached 20% of the fleet at original cost against 17% a year earlier, while average fleet grew less than 2%. The company added USD 580 million of fleet at original cost in the quarter and disposed of USD 200 million against USD 375 million. Net leverage was 3.9 times, and liquidity was USD 2.1 billion. Free cash flow was USD 133 million over nine months.

The company paid a quarterly dividend of USD 0.70 per share to holders of record on Sept. 2.

Guidance and Succession

Management raised full-year guidance to adjusted EBITDA of USD 2.10 billion to USD 2.15 billion and equipment rental revenue of USD 4.475 billion to USD 4.550 billion. Net rental equipment capital spending moved up to USD 1.0 billion to USD 1.1 billion, including about USD 150 million pulled forward from 2027 to meet customer requirements on multiyear mega projects. Free cash flow guidance held at USD 250 million to USD 350 million.

Synergy targets from H&E stand at USD 90 million of incremental cost savings and USD 110 million to USD 120 million of revenue gains. Management cited external forecasts of mega project starts of USD 723 billion in the United States in 2026 and USD 776 billion in 2027, and aims for a 20% share of mega project activity. It also noted softness in interest rate-sensitive commercial construction.

Lawrence Silber moves to executive chairman and Aaron Birnbaum becomes chief executive on Jan. 1.

Rental Markers to Follow

Tracking points include dollar utilization against 43.5%, specialty fleet share relative to 20%, and net leverage against the 3.9 times reached at quarter end.

Further items are realized H&E synergies against the USD 90 million cost target, mega project starts relative to external forecasts, and free cash flow against the guided range.