H&E Equipment (HEES) Closes Precision Rentals Acquisition
H&E Equipment Services, Inc. HEES completed its previously announced acquisition of the business of Precision Rentals. This move increases the density of H&E branches in the Phoenix and Denver metropolitan areas.
On Dec 11, 2023, H&E Equipment entered a definitive agreement with Precision Rentals.
Since 2006, Precision Rentals has grown its equipment rental business and offers reliability, fleet diversity and exceptional customer service. Precision Rentals brings to HEES a mix of general rental assets with a total fleet size (as measured by original equipment cost) of roughly $70 million and an attractive average fleet age of 37 months.
The company’s branch operations in Phoenix, AZ, and Aurora, CO, are in cities with strong construction activity and solid potential, including several mega projects. Following the closure of this acquisition, HEES operates 139 branch locations throughout 30 states.
H&E Equipment has been active on the acquisition front. The company's focus on strategic expansion resulted in a 16% increase in H&E's branch network in the last year.
Branch expansion and fleet growth have been contributing to H&E Equipment's earnings performance in the past few quarters. The company’s adjusted EBITDA was a record $189.1 million in the third quarter of 2023, marking a year-over-year increase of 36.2%.
Average rental rates increased 4.9% from the third quarter of 2022 and 1.2% from the second quarter of 2023. In the nine months ended Sep 30, 2023, HEES’ rental rates increased 7% year over year.
The company's fleet investment in the first nine months of 2023 was a record $595.2 million. Its fleet size was higher than $2.7 billion as of Sep 30, 2023. It boasts the youngest fleet in the industry, with an average rental fleet age of 41.1 months as of Sep 30, 2023 (versus the industry’s 49.2 months).
To capitalize on the solid customer demand, HEES has raised its gross fleet investment target to $650-$700 million for 2023, up from the previously stated $600-$650 million.
Price Performance
Shares of the company have gained 17.1% in the past year compared with the industry’s 26.1% growth.
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Zacks Rank and Stocks to Consider
HEES currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Alamo Group Inc. ALG, Applied Industrial Technologies AIT and A. O. Smith Corporation AOS. ALG currently sports a Zacks Rank #1 (Strong Buy), and AIT and AOS carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alamo Group’s 2023 earnings per share is pegged at $11.59. The consensus estimate for 2023 earnings has moved north by 5% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 19.8%. ALG shares have rallied 47.6% year to date.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 2% in the past 60 days. The company’s shares have gained 37.7% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 20.4%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 40.8% in a year.
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