Equipment rental house Herc Rentals capitalized on large construction projects while expanding its product line in the second quarter as total revenue surged.
Herc Rentals on June 2 completed its acquisition of H&E Equipment Services, contributing to higher revenue as integration activities ramped up in Q2, President and Chief Executive Larry Silber said during the company’s earnings call today.
“Since we closed the transaction, our teams have been working tirelessly to successfully bring the two companies together,” he said. “… We’re also adding key management positions to our sales organization to drive revenue synergies and develop our mid-market capability, where we know H&E excels.”
Herc is already benefiting from expanded product offerings, Silber said.
“One of our new sales reps recently was contacted by a customer of his who currently is running a mega project,” he said. “This wasn’t a project that H&E could have previously supported with its more limited product offering, and Herc didn’t have a relationship with this contractor. … Our national account project pipeline just got a bit bigger.”
Herc is pausing other merger and acquisition initiatives as it prioritizes the integration of H&E, Silber said.
BY THE NUMBERS: Bonita Springs, Fla.-based Herc Rentals reported in Q2:
- Total revenue increased 18.2% year over year to $1 billion;
- Rental revenue rose 13.7% YoY to $870 million;
- Sales of rental equipment jumped 63.1% YoY to $106 million;
- Dollar utilization rate was 38.3%, down from 41% in Q2 of 2024; and
- A net loss totaling $35 million, down from a $70 million profit a year prior.
The loss was largely attributed to $73 million in costs related to the H&E deal and a $49 million loss on assets held for sale, Senior Vice President and Chief Financial Officer Mark Humphrey said during the call.
BIGGER PICTURE: Herc’s continued revenue growth reflects a “secular shift from ownership to rental” in the construction industry, particularly in the specialty rental market, Silber said. The company is capitalizing on strong demand for specialty equipment to support large commercial developments across the nation, he said.
“Further cross-selling specialty gear is an important component of the revenue synergies with H&E,” he said. “In line with this strategy, we’ve continued to over-index our gross CapEx plans toward specialty as a percent of our fleet composition long term. We’re also planning to repurpose general rental branches into pro-solutions facilities beginning this year to support specialty equipment capacity with 160-plus acquired locations.”
NOTEWORTHY: Despite rising input costs and tariff uncertainty, overall construction activity remains strong, with non-residential construction starts projected to rise 7% to $478 billion in 2025, according to Herc’s earnings presentation, citing the Dodge Construction Network.
Dodge also projects infrastructure starts to rise 10% in 2025 to $360 billion and mega-project starts to more than double to $601 billion.
However, some new commercial projects have been paused due to prolonged high interest rates, Silber said.
MARKET REACTION: Shares of Herc Rentals [NYSE: HRI] were down 17.5% from market open to $123.61 as of market close today. It has a market capitalization of $4.1 billion.
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