29.10.2015

Better quarter for H&E

H&E Equipment Services has released its third quarter results with a strong pick up in rental activity and rates.

Year to date total revenues declined just over three percent to $766.6 million, with rental revenues up more than 12 percent offset by a fall in new equipment sales fell 27.5 percent to $175 million. Rental rates improved one percent on the year and the average age of the fleet was reduced marginally to 32 months. Pre-tax profits were down almost 15 percent to $55.2 million.

In the third quarter overall revenues increased marginally to $276.9 million, driven by a nine percent increase in rental revenues, offset by a 17.5 percent drop in new equipment sales. Rental rates were up 1.4 percent on the quarter. Pre-tax profits declined six percent to $25.5 million.

Chief executive John Engquist said: “Our rental business was again strong during the third quarter, with revenues increasing 9.1 percent from a year ago. We also achieved positive rental rate growth and maintained industry-leading utilisation levels. Demand in our industrial markets remains solid and we expect this momentum will continue into 2016, driven primarily by the vast number of significant capital projects planned along the Gulf Coast. In terms of our oil patch exposure, activity in our markets has stabilised and no significant fleet transfers were required during the quarter.”

"While our business continues to perform well overall, we continue to have limited visibility into our distribution business. Our new equipment sales remain soft, primarily as a result of low demand for cranes. We do not expect the normal ramp-up in crane sales during the fourth quarter as we have experienced in previous years. With the weakness and lack of visibility in the distribution business, we now expect revenues to range from $1.028 billion to $1.037 billion".

"We believe our business outlook remains positive due to the expected strength in the commercial construction markets. Due to the continued softness in the oil and gas markets and weak near-term demand in new cranes sales combined with the lack of visibility, we are adjusting our annual guidance announced last quarter”.

Vertikal Comment

This is a very interesting set of numbers highlighting the unusual dichotomy between rental activity and new equipment sales. Normally improved utilisation, and rental rates in a growing economy triggers higher sales of equipment, and yet over the past four to five months this has not happened.

What this disparity may do is build up future demand, or if it continues provide opportunities for rental companies that do invest in new equipment. Anyway this is a decent result from H&E, particularly when one considers that a good deal of the company’s activity comes from the Gulf area where oil, gas and petrochem is a big factor.
Overall encouraging.