H&E Equipment Services’ revenues in the fourth quarter of 2023 were boosted by higher returns in the company’s equipment rental business.
Average rental rates increased 3.8% from a year ago, H&E Equipment reported. Chief Executive Brad Barber said in a Feb. 22 earnings call that the increase in original fleet equipment costs “represents another important catalyst for growth for rental equipment revenues in the quarter and for the year.”
Barber said that H&E Equipment grew its fleet “an estimated 58% over the trailing 36 months,” partly as a result of the company’s investment in branch expansion.
By the numbers
For Q4, H&E reported:
- Sales of rental equipment jumped 34.3% to $40.6 million;
- Total equipment rental revenue was $316.9 million, up 14.9% year over year;.
- Fleet growth was up 18.3% to $432.6 million;.
- New equipment sales were down 54.5% YoY to $9.8 million; and
- Total equipment rentals were up to 48.2%.
“Our rental revenue and fleet is absolutely going to grow and our fleet’s absolutely going to grow,” Barber said.
Fleet utilization time dips
H&E’s average time utilization for its rental equipment, which is based on original equipment cost, was 68.4%, down from 72% in Q4 2022.
“Supply is starting to catch up with demand and we’re starting to see a more normalized environment,” Barber said.
“We’re going to remain disciplined on rates. I think our utilization is going to be slightly pressured here in the first half of the year,” he said. “We are managing and we expect to show some leverage and started definitely to show positive year over yearphysical utilization improvements in the back end of this year.”
- During the quarter: Dollar utilization for H&E equipment dipped slightly, down 3.9% YoY to 40.3%;.
- The company’s fleet of rental equipment was 33% aerial works projects in 2023; and
- The average age of equipment leased is about 2.4 years, making it the youngest fleet in the industry.
“Our fleet age is well below an optimum age,” Barber said. “When you grow at the levels we have been growing our rental fleet, it pushes your fleet age down.”
Rapid expansion
H&E Equipment reported branch network annual growth of 14% last year, adding 14 locations, including three in Q4 in central and southern California.
The company said branch expansions played a key role in its 2023 growth. It anticipates 12 to 15 more locations this year and will continue evaluating opportunities to acquire new dealerships and expand its national footprint.
H&E Equipment is the fifth-largest equipment rental organization in North America, according to the 2023 RER 100 published in May by Rental Equipment Register, trailing United Rentals, Sunbelt Rentals, Herc Rentals and Home Depot Rentals. The company recorded $956 million in rental volume in 2022, and a total volume of $1.2 billion, according to the RER report.
Shares of H&E Equipment Services Inc. [Nasdaq: HEES] were trading at $53.38 at market close today, down $1.15 or 2.1% from market open. H&E Equipment has a market capitalization of $1.94 billion.
Registration is now open for Equipment Finance Connect, the nation’s only dealer-centric equipment lending and leasing event, which will take place May 5-7 in Nashville, Tenn. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.
