03.08.2015

Tough quarter for H&E

Louisiana based H&E Equipment services is the latest US rental company/distributor to report first half numbers that suffered from the extreme spring weather in parts of the USA.

Total revenues for the first six months fell around 5.5 percent to $489.77 million, although rental improved around 14 percent, but sales both new and used were well down with new equipment deliveries 32 percent below the same period last year. Pre-Tax profits were hammered, falling 22 percent to $29.7 million.

The second quarter was similar to the first with total revenues dropping around 6.6 percent to $262.4 million, thanks to lower sales, while rental was around 10 percent higher. Pre-tax profits were 17 percent lower at $19.4 million. The situation has apparently improved substantially, but the company is reigning in its full year forecasts a little, but at $1.03 to $1.05 will still be close to last year’s record of $1.09 billion.

Chief executive John Engquist said: “The extreme rainfall and subsequent flooding that occurred in May throughout the central United States had a significant impact on our operations as construction activity slowed significantly for nearly a month in many of our regions. Despite this unanticipated challenge and ongoing softness in the oil patch, rental revenues increased nearly 10% from a year ago. Most market indicators remain positive and we believe the recovery in the commercial construction markets will continue to accelerate throughout the remainder of this year and into 2016. Activity in June picked up significantly and this momentum is continuing into July. Increased commercial construction activity in other markets continues to offset the demand declines related to oil and gas. Overall, we are pleased with the trends in our rental business and overall momentum in the commercial construction markets as we head into the second half of this year.”

“Due to the unusually wet spring and ongoing softness in the oil and gas markets and the resulting delayed seasonal ramp, we are adjusting our annual guidance announced in our first quarter earnings release and conference call. For 2015, we now expect our revenues to range from $1.030 billion to $1.052 billion and EBITDA in the range of $319 million to $335 million.”

Vertikal Comment

H&A is among friends facing challenges from lower construction activity due to the weather and also perhaps a slightly softer market. As we have already said when reporting on the other results, this should prove to be a temporary correction/pause in what is still an early point on a longer term upward trend and economic cycle.

We would expect the company to come it fairly close to last year with strong prospects for a return to growth in 2016.