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H&E Equipment (HEES) Rises 66% YTD: What's Driving the Rally?

Zacks Equity Research

H&E Equipment Services, Inc. HEES has performed well so far in 2019, with its shares gaining 65.7%. Solid financial performances, healthy fundamentals and growth opportunities supported positive market sentiments for the company.

The Baton Rouge, LA-based company, with a market capitalization of $1.2 billion, belongs to the Zacks Manufacturing – Construction and Mining industry, which in turn belongs to the Zacks Industrial Products sector. It currently has a Zacks Rank #2 (Buy) and a VGM Score of A. The company’s earnings are predicted to rise 11.9% in the next five years.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Year to date, H&E Equipment has outperformed its industry’s growth of 13.1%, the sector’s rise of 19.1% and the S&P 500’s rally of 22.8%.




Factors Driving the Stock

We believe that the company’s share price has gained momentum on better-than-expected results for the last four quarters (including for the fourth quarter of 2018 and the first three quarters of 2019). Average positive earnings surprise for the last four quarters is 31.85%.

Notably, the company’s earnings in the last reported quarter surpassed estimates by 8.22% and sales beat the same by 3.13%. Also, gross margin in the quarter increased 180 basis points year over year.

The company is gaining from a diversified customer base, solid heavy construction and industrial equipment offerings, efficient management team, and effective distribution channel. Also, focus on strengthening its rental business, exposure in earth-moving product category and expansion in new markets will likely be boons. In addition, shareholder-friendly policies raise the stock’s attractiveness. Dividend payment is a popular way of boosting stakeholders’ wealth.

The company is committed to enhancing portfolio through acquisitions. In February 2019, it added Texas-based We-Rent-It to its portfolio. Notably, We-Rent-It provides construction (non-residential) equipment on rent.

Moreover, H&E Equipment is well-positioned to gain from solid demand in non-residential and some other end-user construction markets in 2019. Its business in the energy market remains solid.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $2.52 for 2019 and $2.70 for 2020, reflecting growth of 2% and 3.8% from the respective 60-day-ago figures. Such positive revisions in earnings estimates are reflective of positive sentiments for the company.

H&E Equipment Services, Inc. Price and Consensus

 

H&E Equipment Services, Inc. Price and Consensus

H&E Equipment Services, Inc. price-consensus-chart | H&E Equipment Services, Inc. Quote

H&E Equipment’s Performance Versus Three Peers

H&E Equipment has outperformed many peers so far in 2019. Three such stocks are Astec Industries, Inc ASTE, Caterpillar Inc CAT and Terex Corporation TEX, with respective year-to-date gains of 27.5%, 15.2% and 5.6%.

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