Company Reports

Herc reported solid performance in the first quarter. The market reacted positively by sending Herc’s shares up nearly 3.5% in intraday trading. Following the earnings update, we raised our fair value estimate by 5% to $166 per share, up from $158. Based on our cash flow projections, we think Herc’s shares are 8% undervalued. We have become more optimistic about the company’s prospects over the past couple of quarters. Demand has moderated from high levels but remains positive.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We saw no surprises in Herc’s fourth-quarter earnings, though the market sent shares down approximately 9% in intraday trading. We think the market was focused on the company missing consensus EPS estimates by a mid-single-digit rate and consensus sales estimates by a low-single-digit rate.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We raised our fair value estimate by 6% to $152 (from $143 previously), following Herc's recent investor day. Key changes to our cash flow model included upward adjustment to rental revenue and adjusted EBITDA from 2024-26. On an organic basis, Herc believes its rental revenue compound annual growth rate will land between 10%-14% from 2024-26, assuming outsize growth compared with the rental market. In order to outgrow the rental market, Herc will need to grow its fleet, expand further into specialty fleet, and penetrate urban markets further.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

Herc reported solid third-quarter earnings, thanks to stable rental demand in North America. Our fair value estimate increased 2% to $143 from $140 previously, mainly due to the time value of money since our last update.

Herc Holdings’ stock fell nearly 4% in intraday trading on July 25, following second-quarter earnings. We believe the market reacted negatively to the company missing FactSet consensus estimates for both sales and earnings per share. However, we didn’t think the miss was big enough to get concerned about the balance of the year. In our view, Herc is still poised to grow both its top and bottom lines by over 20% in 2023, and we leave our $140 fair value estimate unchanged.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

Herc Rentals reported solid top-line growth in the first quarter. Rental revenue increased 24% year on year, thanks to strong demand. Customers have been pushed to the rental channel over the past couple of years, given the supply constraints in new equipment manufacturing. The tight supply market has certainly been challenging to navigate, but Herc has proved to be resilient. Herc and the large rental players have worked hard to acquire fleet to meet demand. Over time, we expect rental demand to moderate, but 2023 is still shaping up to be a strong year. We’re projecting Herc to grow sales by 19% year on year, while operating margins expand by 130 basis points to 21.7%.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

Herc reported solid numbers to end 2022, but investors sent the company’s shares down approximately 6% intraday. We think the negative sentiment was brought on by the company slightly missing consensus fourth-quarter EPS estimates (by roughly 3%). However, in our view, the company continued to show strength across the board, thanks to strong rental demand. The same factors we've discussed in recent quarters were at play, for example, constrained new equipment supply. This dynamic has led many construction contractors to rent equipment while supply chains correct.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

Herc posted another strong quarter of results, thanks to continued strength in rental demand. The industry has been lifted by tight supply in the equipment market over the past year. The heavy equipment industry has been hampered by the component shortage, leading to a shortage of new equipment. Heavy equipment manufacturers have had machinery sit on factory floors waiting for chips to be put in. As a result, contractors have increasingly turned to rental equipment companies like Herc to get the equipment they need to complete jobs.

We think Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

Herc Rentals’ second-quarter results showed the equipment rental market continues to run at a strong pace, despite recessionary concerns in the United States. This backdrop led us to increase our fair value estimate to $129 from $123 previously. Herc grew rental revenue by 35% year on year, thanks to strong volume and price growth. The latter metric was up 5.5% year on year, as the company has been diligent in responding to inflation.

We think Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and at thousands of other rental companies across North America.