H&E Equipment Services (HEES): Zacks Rank Buy

Zacks

H&E Equipment Services (HEES) has posted four straight positive earnings surprises and carries an implied earnings growth rate of 43% helping to make the stock a Zacks #2 Rank (Buy).

Company Description

H&E Equipment Services is one of the largest integrated equipment services companies in the United States with full-service facilities throughout the Intermountain, Southwest, Gulf Coast & Southeast regions of the United States. The Company is focused on heavy construction & industrial equipment and rents, sells & provides parts & service support for four core categories of specialized equipment. They are hi-lift or aerial platform equipment, cranes, earthmoving equipment & industrial lift trucks. By providing equipment rental, sales, on-site parts, repair and maintenance functions under one roof, the company is a one-stop provider for its customers' varied equipment needs. This full service approach provides the Company with multiple points of customer contact, enabling it to maintain a high quality rental fleet, as well as an effective distribution channel for fleet disposal and provides cross-selling opportunities among its new and used equipment sales, rental, parts sales & service operations.

H&E Equipment Services Tops Estimates in Four Straight Quarters

H&E Equipment Services topped the Zacks Consensus Estimate in each of the last four quarters. The average beat has been $0.10 above the Zacks Consensus Estimate which works out to be an average beat of 167%. In the sessiosn following the earnings releases HEES has seen its stock move higher two times and lower two times in the last four reports. The average of these four moves is an increase of 1.6%.

The largest positive price movement in the stock came the day after the company reported the September 2011 quarter. H&E Equipment Services beat the topline estimate of $178 million by posting revenue of $184 million, a year over year increase of 19%. EPS of $0.14 was $0.07 higher than the $0.07 Zacks Consensus Estimate which caused the stock moved higher by more than 12%.

H&E Equipment Services - ticker HEES  >

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H&E Equipment Services Most Recent Reported Earnings

On May 3, 2012 H&E Equipment Services reported revenue of $174 million, in line with the Zacks Consensus Estimate and up from $135 million reported in year ago quarter, an increase of 29%. Earnings per share came in at $0.11, $0.07 higher than the Zacks Consensus Estimate of $0.04. The beat of 175% didn't do much for the stock as investors sold off forcing the stock lower by 13% in the session following earnings.

H&E Equipment Services Sees Estimates Moving Higher

H&E Equipment Services has seen earnings estimates move higher following the recent positive earnings surprise. The Zacks Consensus Estimate for 2012 was as low as a loss of $0.60 in January 2012 and has since moved higher to $0.86.

Similarly, estimates for 2013 have moved from $0.83 to $1.23 over the same time frame. The implied earnings growth rate of 43% is something that aggressive growth investors tend to look for.

Valuation

H&E Equipment Services valuation metrics are a little higher than the industry average. That industry average appears to be much lower than the rest of the broader market. That said, the forward PE multiple of HEES of 19x seems much higher than the 9x industry average, but the industry average is not expecting a 43% growth rate for earnings. The price to book is relatively low at 2.1x for H&E Equipment Services, and just fractionally higher than the 2x industry average. The 0.7x price to sales is right about in line with the industry average. Overall, the valuation for H&E Equipment Services is quite low given the recent positive earnings surprises and large implied earnings growth rate.

The Chart

A look at the price and consensus chart shows a stock that has seen some peaks and valleys over the last few years. Technicians might say that the stock will see resistance at $20 but with the implied growth rate of 43% for HEES, they will likely be proven incorrect. Earnings estimates are increasing and the growth of earnings is shown by the gaps between the earnings lines. As 2013 earnings continue to increase, the stock is likely to continue higher. H&E Equipment Services is a Zacks #2 Rank (Buy).

H&E Equipment Services - ticker HEES  >

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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H&E EQUIP SVCS (HEES): Free Stock Analysis Report

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