H&E Equipment Services (HEES) AI Stock Analysis

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H&E Equipment Services

(NASDAQ:HEES)

Rating:56Neutral

Price Target:―

H&E Equipment Services' overall stock score is supported by strong revenue growth and a strategic merger with Herc Holdings, promising future synergies. However, technical indicators suggest short-term bearishness, and the high P/E ratio indicates overvaluation, which are potential risks.

Positive Factors

Acquisition

The acquisition by United Rentals provides more opportunities for growth in a slower market.

Strategic Positioning

H&E's evolution to a pure play rental firm and its positioning across local/national projects, including mega projects, have positively impacted its market stance.

Valuation

Despite being better aligned with peers, H&E is viewed as undervalued, maintaining a Buy recommendation.

Negative Factors

Market Competition

There is a modest downside for construction machinery OEMs due to United Rentals' more favorable pricing and different mix of suppliers.

Regulatory Risks

Key risks include potential new diligence surprises or financing issues, and regulatory review is a potential risk.

H&E Equipment Services (HEES) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$3.50B

Dividend Yield1.16%

Average Volume (3M)699.03K

Price to Earnings (P/E)38.3

Beta (1Y)1.53

Revenue Growth-3.52%

EPS Growth-46.60%

CountryUS

Employees2,800

SectorIndustrials

Sector Strength92

IndustryRental & Leasing Services

Share Statistics

EPS (TTM)-0.17

Shares Outstanding36,666,584

10 Day Avg. Volume646,945

30 Day Avg. Volume699,033

Financial Highlights & Ratios

PEG Ratio-1.38

Price to Book (P/B)5.44

Price to Sales (P/S)0.00

P/FCF Ratio29.66

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$92.00

Price Target Upside-3.62% Downside

Rating ConsensusHold

Number of Analyst Covering0

H&E Equipment Services Business Overview & Revenue Model

Company DescriptionH&E Equipment Services, Inc. operates as an integrated equipment services company. The company operates in five segments: Equipment Rentals, Used Equipment Sales, New Equipment Sales, Parts Sales, and Repair and Maintenance Services. The Equipment Rentals segment provides construction and industrial equipment for rent on a daily, weekly, and monthly basis through a fleet of approximately 42,725 pieces of equipment. The Used Equipment Sales segment sells used equipment through retail sales force primarily from its rental fleet, as well as inventoried equipment that are acquired through trade-ins from equipment customers. The New Equipment Sales segment sells new construction equipment through a professional in-house retail sales force. The Parts Sales segment sells parts for the equipment customers, as well as offers for its rental fleet. The Repair and Maintenance Services segment serves its rental fleet and equipment owned customers, as well as offers ongoing preventative maintenance services to industrial customers. It also provides ancillary equipment support activities, including transportation, hauling, parts shipping, and loss damage waivers. The company's rental fleet consists of hi-lift or aerial work platforms, cranes, earthmoving and material handling equipment, and others. It serves industrial and commercial companies, construction contractors, manufacturers, public utilities, municipalities, maintenance contractors, and various other industrial account customers. As of December 31, 2021, the company had a network of 102 service facilities in the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf Coast, Southeast, and Mid-Atlantic regions of the United States. H&E Equipment Services, Inc. was founded in 1961 and is headquartered in Baton Rouge, Louisiana.

How the Company Makes MoneyH&E Equipment Services generates revenue primarily through three main channels: equipment rentals, sales of new and used equipment, and repair and maintenance services. Equipment rentals form a significant portion of the company's income, capitalizing on the demand for temporary access to high-quality machinery without the commitment of purchase. Additionally, HEES sells both new and used construction and industrial equipment, leveraging its extensive supplier relationships and inventory. The company also earns revenue from maintenance and repair services, providing ongoing support and ensuring the longevity and performance of the equipment they rent or sell. These services are often complemented by parts sales, contributing to a stable and recurring revenue stream. Strategic partnerships with equipment manufacturers and suppliers, along with a strong market presence, further bolster HEES's earning capacity.

H&E Equipment Services Earnings Call Summary

Earnings Call Date:Apr 29, 2025

(Q3-2024)

% Change Since: 5.62%|

Next Earnings Date:Aug 05, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with significant achievements in branch expansion and active participation in mega projects, which are promising for future growth. However, these were offset by declines in total revenues, lower physical utilization, and increased expenses, leading to reduced net income and EBITDA. The outlook for 2025 appears optimistic, but current challenges remain.

Q3-2024 Updates

Positive Updates

Branch Expansion Achievements

A record number of 8 branches were added in the third quarter, with a ninth branch opened in October. This expansion exceeded the company's expectations, growing their presence to 157 locations across 32 states, representing a 14% increase since the end of 2023 and approximately 54% since the end of 2021.

Mega Project Opportunities

H&E Equipment is actively participating in mega projects, with projects valued at $537 billion within their operational regions. The company is deployed on nearly half of these projects, which include data centers, solar and wind farms, and LNG export facilities.

Equipment Rental Revenue Growth

Total equipment rental revenues improved by 3.3% in the quarter, with a 9.2% increase on a trailing 12-month basis compared to the same period in 2023.

Strong Rental Equipment Margins

Margins on the sales of rental equipment exceeded 60% in the quarter, indicating strong profitability from equipment sales.

Negative Updates

Decline in Total Revenues

Total revenues declined by 4% from the year-ago quarter, primarily due to a more than 47% reduction in sales of rental equipment.

Lower Physical Utilization and Rental Rates

Physical utilization declined 240 basis points to 67.6%, and rental rates showed a slight decline of 0.1% year-over-year due to shifts towards mega projects.

Increased SG&A Expenses

SG&A expenses increased by 7.9% to $112.4 million, primarily due to branch expansion initiatives. This led to an increase in SG&A as a percentage of revenues from 26% to 29.2%.

Lower Net Income and EBITDA

Net income declined to $31.1 million from $48.9 million in Q3 2023, and adjusted EBITDA decreased by 8.4% to $175.3 million.

Company Guidance

In the third quarter of 2024, H&E Rentals reported mixed financial results, with total revenues declining by 4% year-over-year, primarily due to a 47% drop in rental equipment sales. Despite these challenges, equipment rental revenues rose by 3.3%, facilitated by the addition of 27 new locations, although physical utilization fell by 240 basis points to 67.6%. The company's fleet size, measured by original equipment cost, increased by 8.1%, reaching nearly $3 billion. Gross margins on rental equipment sales remained robust, exceeding 60%, although overall gross margins dipped to 44.5% from 47% a year earlier. The adjusted EBITDA margin declined to 45.6%. H&E's expansion efforts included the opening of 16 new branches in 2024, contributing to a 54% increase in branch count since 2021. The company remains optimistic about 2025, supported by positive indicators like the Dodge Momentum Index, while maintaining disciplined capital expenditure and rental rate strategies amidst a mixed non-residential construction spending environment.

H&E Equipment Services Financial Statement Overview

Summary

H&E Equipment Services shows robust revenue growth and improving profitability in its income statement. However, the balance sheet reveals high historical leverage despite recent improvements, and cash flow analysis highlights challenges with negative free cash flow in past years. Addressing cash flow and maintaining balance sheet stability are crucial for long-term health.

Income Statement

Positive

H&E Equipment Services has demonstrated strong revenue growth with an increasing trend from $1.24 billion in 2022 to $1.52 billion in 2024. The gross profit margin for 2024 is approximately 44.5%, indicating effective cost management. Although the net profit margin shows improvement, reaching around 10.7% in 2024, EBIT and EBITDA margins have seen fluctuations due to varying operational efficiencies over the years. Overall, the income statement indicates a positive growth trajectory and improving profitability.

Balance Sheet

Neutral

The company's balance sheet reveals a significant reduction in total debt from 2023 to 2024, with a notable improvement in equity positioning. However, the absence of stockholders' equity data for 2024 impedes a complete analysis of leverage ratios. Historically, the debt-to-equity ratio has been high, suggesting potential risks related to financial leverage. Nonetheless, the company's efforts to reduce debt and increase equity are positive steps towards achieving balance sheet stability.

Cash Flow

Neutral

Cash flow analysis shows a challenging scenario with negative free cash flow in recent years, particularly in 2023. The lack of operating and free cash flow data for 2024 limits a comprehensive assessment. Historically, the company has faced difficulties in converting operating profits into free cash flow, indicating potential challenges in operational efficiency or capital expenditure management. Improving cash flow management remains a critical focus area.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.46B	1.52B	1.47B	1.24B	1.06B	1.17B
	Gross Profit
619.60M	675.20M	684.46M	555.16M	415.36M	402.62M
	EBIT
180.08M	229.31M	276.70M	-83.04M	-134.53M	-150.75M
	EBITDA
625.65M	219.65M	672.50M	550.27M	407.66M	273.62M
	Net Income Common Stockholders
90.89M	122.98M	169.29M	132.17M	60.56M	-32.67M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
10.32M	16.41M	8.50M	81.33M	357.30M	310.88M
	Total Assets
2.68B	2.96B	2.64B	2.29B	2.08B	1.98B
	Total Debt
0.00	243.65M	1.61B	1.41B	1.42B	1.41B
	Net Debt
1.59B	227.24M	1.60B	1.33B	1.06B	1.10B
	Total Liabilities
2.07B	2.17B	2.11B	1.89B	1.78B	1.74B
	Stockholders Equity
603.88M	785.66M	534.29M	401.04M	303.38M	238.23M
Cash Flow		Free Cash Flow
111.75M	44.34M	-340.35M	-202.65M	-193.13M	150.99M
	Operating Cash Flow
509.36M	498.31M	405.48M	313.24M	259.57M	286.02M
	Investing Cash Flow
-320.33M	-459.04M	-608.76M	-546.54M	-170.97M	21.09M
	Financing Cash Flow
-188.77M	-28.65M	130.45M	-42.67M	-42.18M	-10.47M

H&E Equipment Services Technical Analysis

Technical Analysis Sentiment

Positive

Last Price95.46

Price Trends

50DMA

93.03

Positive

100DMA

88.68

Positive

200DMA

69.84

Positive

Market Momentum

MACD

1.03

Negative

RSI

61.81

Neutral

STOCH

45.09

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HEES, the sentiment is Positive. The current price of 95.46 is above the 20-day moving average (MA) of 93.21, above the 50-day MA of 93.03, and above the 200-day MA of 69.84, indicating a bullish trend. The MACD of 1.03 indicates Negative momentum. The RSI at 61.81 is Neutral, neither overbought nor oversold. The STOCH value of 45.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HEES.

H&E Equipment Services Risk Analysis

H&E Equipment Services disclosed 52 risk factors in its most recent earnings report. H&E Equipment Services reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 3 New Risks

The Offer consideration payable to holders of our common stock will not be adjusted for changes in our business, assets liabilities, prospects, outlook, financial condition or results of operations, or in the event of any change in the price of our common stock. Q4, 2024

The Company's shareholders cannot be sure of the value of the Stock Offer Price they will receive in the Merger, if completed, because the exchange ratio is fixed and the market price of Herc common stock has fluctuated and may continue to fluctuate. Q4, 2024

Stockholder litigation could prevent or delay the consummation of the Offer and Merger or otherwise negatively impact our business, operating results and financial condition. Q4, 2024

H&E Equipment Services Peers Comparison

Overall Rating

UnderperformOutperform

Sector (65)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MGRC	79 Outperform	$2.79B	11.75	22.80%	1.68%	7.31%	91.99%
HRI	68 Neutral	$3.58B	28.02	9.60%	2.14%	8.34%	-63.02%
Sector *	65 Neutral	$4.41B	12.06	5.22%	249.80%	4.09%	-12.16%
WSC	64 Neutral	$5.11B	311.10	1.28%	0.26%	-0.77%	-94.12%
PONY	59 Neutral	$7.48B	―	-33.58%	―	4.27%	-120.11%
HEES	56 Neutral	$3.50B	38.33	15.74%	1.16%	-3.52%	-46.60%
VSTS	55 Neutral	$788.06M	122.82	-2.73%	2.34%	-4.11%	-115.02%

* Industrials Sector Average

Performance Comparison

HEES

H&E Equipment Services

95.46

48.86

104.85%

WSC

WillScot Mobile Mini Holdings

28.03

-10.84

-27.89%

HRI

Herc Holdings

131.30

-7.23

-5.22%

MGRC

Mcgrath Rentcorp

115.42

7.05

6.51%

VSTS

Vestis Corporation

6.12

-5.38

-46.78%

PONY

Pony AI Inc. Sponsored ADR

21.35

8.33

63.98%

H&E Equipment Services Corporate Events

M&A TransactionsBusiness Operations and Strategy

H&E Equipment Services Merges with Herc Holdings

Positive

Feb 19, 2025

On February 19, 2025, H&E Equipment Services entered into a merger agreement with Herc Holdings, leading to the acquisition of H&E by Herc in a cash and stock transaction. This strategic move aims to enhance Herc’s growth strategy, creating the third-largest rental company in North America with significant synergies and improved financial profiles. The merger, expected to close mid-2025, will see H&E shareholders owning a significant portion of the combined entity, promising substantial benefits for stakeholders.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.