Equipment dealer Alta Equipment Group’s construction new and used equipment sales fell in the third quarter as the sector awaited clarity on election outcomes and interest rates.
STATE OF PLAY: As part of an overall slowdown in the industrial sector, Alta Equipment’s total revenue, construction new and used equipment sales and material handling new and used equipment sales all slipped in Q3, Alta Equipment’s Chief Executive Ryan Greenawalt said during the company’s Nov. 12 earnings call.
“Like many other industrial companies, our third-quarter results continue to be impacted by the ongoing uncertainty in our end-user markets, particularly regarding customers’ commitment to capital investments in purchasing new equipment,” he said. “Many customers put capital investments on hold in the third quarter while they awaited election outcomes and more clarity on interest rates, however, post-election, sentiment has already improved, and we anticipate that customers will deploy capital more broadly in the fourth quarter and into 2025.”
While Alta Equipment’s down quarter follows a sales dip in the second quarter, the company continues to make progress to a more diverse and balanced business, Greenawalt said.
“While the equipment sales market has been disappointing in 2024, our dealership model with diverse revenue streams has shielded our business from market cyclicality,” he said.
NOTEWORTHY: Alta Equipment also pointed to improving aggressiveness from construction and material handling manufacturers that could benefit it in the long term, Chief Financial Officer Tony Colucci said during the earnings call.
“What we have seen is some of the OEMs that we represent getting a little bit more aggressive with financing programs and leasing programs, so that’s been well received by the sales team here,” he said. “That’s some of these OEMs catching up to the market in that regard.”
While equipment sales could remain low or could improve, Alta still appears set for growth, Alex Rygiel, senior managing director at B. Riley Financial, said in the company’s earnings note.
“However, we believe the slowing of equipment sales could be temporary and could help support [Alta]’s parts and services businesses at higher margins,” he said. “We believe the company is well positioned for longer-term growth with its OEM and customer relationships, geographic exposure, staff of highly-skilled technicians, and a solid pipeline of M&A opportunities.”
BY THE NUMBERS: Alta Equipment’s construction revenue saw a year-over-year revenue decrease in Q3, while revenues for material handling and master distribution, the company’s environmental processing equipment distribution segment, increased slightly, according to the company’s Nov. 12 10-Q filing with the Securities and Exchange Commission.
In the filing, Alta Equipment reported:
- Total revenues of $448.8 million, down 3.7% YoY;
- Construction segment revenue of $262.3 million, down 7% YoY;
- New- and used-construction equipment sales revenue of $118 million, down 21.8% YoY;
- Construction rental revenue of $34 million, down 0.3% YoY;
- Material handling revenue of $168.9 million, up 0.2% YoY;
- Material handling revenue for new and used equipment of $87.2 million, down 3.9% YoY;
- Material handling rental revenue of $19.3 million, down 1.5% YoY;
- For master distribution, revenue of 0.6% YoY, up to $18.2 million;
- New and used master distribution sales revenue of $15.3 million, up 0.7% YoY.
- Floor plan payable for new equipment of $309.2, up 3.8% YoY; and
- Floor plan payable for used and rental equipment at $86.7 million, down 12.9% YoY.
MARKET REACTION: Shares of Alta Equipment Group (NYSE: ALTG) were down 0.25% or 2 cents from market open to $7.97 as of market close today. Alta Equipment Group has a market capitalization of $246.41 million.
THE BOTTOM LINE: Alta Equipment expects market conditions to improve during the first half of 2025 and demand to increase post-election, Colucci said.
“We expect a normalization in the oversupply of new equipment in the first half of the year and construction equipment spending to be supported by easing interest rates and more favorable lending conditions,” he said.
(Updated with analyst comment in paragraph nine)
