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Herc Holdings (HRI)
NYSE:HRI
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Herc Holdings
(NYSE:HRI)
55Neutral
Positive Factors
Acquisition
The pending acquisition of H&E presents attractive upside despite an uncertain near-term macro outlook.
Earnings
Herc's ability to capture deal synergies and realize outgrowth from solid mega project tailwinds provides a framework for a compelling earnings trajectory and margin expansion.
Valuation
Valuation is seen as attractive at current levels, with a strong case for multiple expansion as deal synergies are captured and debt is paid down.
Negative Factors
Construction Trends
Herc is paying a premium to the current valuation at a time when construction trends are weakening.
Integration
The integration will be a substantial undertaking, at a time when Herc’s execution on flow through has been mixed.
Leverage
There are concerns about leverage post the H&E deal, although the potential to cut fleet capex and throw off more free cash flow could accelerate debt paydown.
Herc Holdings (HRI) vs. S&P 500 (SPY)
Market Cap
$3.70B
Dividend Yield2.08%
Average Volume (3M)622.24K
Price to Earnings (P/E)17.5
Beta (1Y)2.10
Revenue Growth8.71%
EPS Growth-39.07%
CountryUS
Employees7,600
SectorIndustrials
Sector Strength66
IndustryRental & Leasing Services
Share Statistics
EPS (TTM)7.41
Shares Outstanding28,483,389
10 Day Avg. Volume540,159
30 Day Avg. Volume622,243
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.08
Price to Cash Flow (P/CF)2.90
P/FCF Ratio14.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$184.80Price Target Upside42.31% Upside
Rating ConsensusHold
Number of Analyst Covering6
Herc Holdings Business Overview & Revenue Model
Company DescriptionHerc Holdings Inc., through its subsidiaries, operates as an equipment rental supplier in the United States and internationally. It rents aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction, and lighting equipment. The company also provides ProSolutions, an industry specific solution-based services, which include power generation, climate control, remediation and restoration, pump, trench shoring, and studio and production equipment; and ProContractor professional grade tools. In addition, it offers various services, including repair, maintenance, equipment management, and safety training; and equipment re-rental and on-site support services, as well as ancillary services, such as equipment transport, rental protection, cleaning, refueling, and labor. Further, the company sells used equipment and contractor supplies, such as construction consumables, tools, small equipment, and safety supplies. It serves non-residential and residential construction, specialty trade, restoration, remediation and environment, and facility maintenance contractors; industrial manufacturing industries, including automotive and aerospace, power, metals and mining, agriculture, pulp, paper and wood, food and beverage, and refineries and petrochemical industries; infrastructure and government sectors; and commercial facilities, hospitality, healthcare, recreation, entertainment production, and special event management customers. The company sells its products through its sales team and industry catalogs, as well as through participation and sponsorship of industry events, trade shows, and Internet. Herc Holdings Inc. was founded in 1965 and is based in Bonita Springs, Florida.
How the Company Makes MoneyHerc Holdings generates revenue primarily through the rental and leasing of its diverse equipment fleet to a broad customer base across multiple industries. The company's key revenue streams include daily, weekly, and monthly rental agreements, which are structured to meet the short-term and long-term needs of its clients. Additionally, Herc Holdings earns income from ancillary services such as equipment maintenance, repair services, and the sale of used equipment. The company's strategic partnerships with equipment manufacturers and its expansive network of rental locations further bolster its earnings by ensuring a steady supply of high-demand machinery and enhancing customer accessibility.
Herc Holdings Financial Statement Overview
Summary
Herc Holdings demonstrates strong revenue growth and operational efficiency, with high gross and EBIT margins. However, a decline in net profit margin and return on equity suggests challenges in profitability and cost management. The reduction in leverage is positive, but liquidity risks from cash flow issues need addressing.Income Statement
Herc Holdings shows a solid revenue growth trend, with a 10.1% increase from 2023 to 2024. Gross profit margin stands robustly at 100%, indicating efficient cost management. However, the net profit margin has decreased to 5.9% in 2024 from 10.6% in 2023, suggesting higher operational costs or other expenses impacting profitability. The EBIT margin improved significantly to 86.6% in 2024, which shows enhanced operational efficiency, albeit with a reduced EBITDA margin of 14.5%.75
Positive
Balance Sheet
The company's debt-to-equity ratio decreased to 0.65 in 2024 from 3.5 in 2023, reflecting improved financial leverage and reduced risk. Return on equity dropped to 15.1% in 2024 from 27.3% in 2023, indicating a decline in profitability relative to shareholder's equity. The equity ratio improved to 17.7%, suggesting a stronger capital structure with a higher proportion of equity financing.65
Positive
Cash Flow
Herc Holdings exhibits a significant decline in cash flow performance, with no free cash flow in 2024 compared to the negative free cash flow of $-390 million in 2023. The operating cash flow to net income ratio cannot be computed for 2024 due to zero operating cash flow, indicating potential liquidity concerns. The company's cash flow metrics reflect challenges in converting profits into cash.40
Negative
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.37B | 3.28B | 2.74B | 2.07B | 1.78B | Gross Profit |
| 1.16B | 1.22B | 1.06B | 688.50M | 464.10M | EBIT |
| 0.00 | 663.00M | 558.90M | 379.90M | 202.80M | EBITDA |
| 1.36B | 1.43B | 1.19B | 865.40M | 654.60M | Net Income Common Stockholders |
| 211.00M | 347.00M | 330.00M | 224.00M | 73.70M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 83.00M | 71.00M | 53.50M | 35.10M | 33.00M | Total Assets |
| 7.88B | 7.06B | 5.96B | 4.49B | 3.59B | Total Debt |
| 902.00M | 4.48B | 3.62B | 2.47B | 2.05B | Net Debt |
| 819.00M | 4.41B | 3.56B | 2.43B | 2.02B | Total Liabilities |
| 6.48B | 5.79B | 4.85B | 3.51B | 2.85B | Stockholders Equity |
| 1.40B | 1.27B | 1.11B | 976.90M | 742.00M |
| Cash Flow | Free Cash Flow | |||
| 16.00M | -390.00M | -355.50M | 102.20M | 225.40M | Operating Cash Flow |
| 1.23B | 1.09B | 916.70M | 744.00M | 610.90M | Investing Cash Flow |
| -1.51B | -1.58B | -1.68B | -961.30M | -207.50M | Financing Cash Flow |
| 299.00M | 512.00M | 784.10M | 219.60M | -406.00M |
Herc Holdings Technical Analysis
Negative
129.86
Price Trends
162.01
Negative
184.56
Negative
168.04
Negative
Market Momentum
-5.94
Negative
42.47
Neutral
51.61
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HRI, the sentiment is Negative. The current price of 129.86 is below the 20-day moving average (MA) of 133.41, below the 50-day MA of 162.01, and below the 200-day MA of 168.04, indicating a bearish trend. The MACD of -5.94 indicates Negative momentum. The RSI at 42.47 is Neutral, neither overbought nor oversold. The STOCH value of 51.61 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HRI.
Herc Holdings Risk Analysis
Herc Holdings disclosed 28 risk factors in its most recent earnings report. Herc Holdings 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 0 New Risks
Herc Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $2.38B | 7.23 | 19.13% | 1.90% | -0.47% | -34.74% | |
75 Outperform | $38.62B | 15.28 | 30.74% | 1.13% | 7.07% | 9.56% | |
70 Outperform | $3.49B | 28.27 | 21.26% | 1.15% | 3.22% | -27.67% | |
67 Neutral | $7.74B | 10.89 | 50.69% | 1.13% | 6.26% | 12.62% | |
65 Neutral | $308.70M | 5.72 | 8.98% | ― | -2.24% | 42.13% | |
62 Neutral | $8.08B | 13.63 | 3.82% | 3.13% | 3.58% | -14.35% | |
55 Neutral | $3.70B | 17.54 | 15.81% | 2.08% | 8.71% | -39.07% |
* Industrials Sector Average
Performance Comparison
HRI
Herc Holdings
129.86
-30.35
-18.94%
ALSN
Allison Transmission Holdings
90.48
9.63
11.91%
HEES
H&E Equipment Services
94.17
32.00
51.47%
MTW
Manitowoc Company
8.05
-5.63
-41.15%
TEX
Terex
35.83
-27.78
-43.67%
URI
United Rentals
591.17
-96.47
-14.03%
Herc Holdings Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -37.31% | Next Earnings Date: Apr 17, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted robust financial performance, strategic growth, and successful mega project participation, but also acknowledged challenges in Cinelease business valuation and local market slowdowns due to interest rates.Highlights
Record Level Financial Performance
In 2024, Herc achieved record level results across key financial metrics. Equipment rental revenue was up just over 11% for the full year, and adjusted EPS was $12.88 per share, up about 5% over last year.
Expansion and Growth Strategy
Herc opened 23 greenfield branches and added 28 more locations through 9 acquisitions in 2024, strengthening its urban market growth strategy and enhancing its national account capabilities.
Mega Project Participation
Herc's participation in mega projects led to double-digit rental revenue growth, with national accounts and specialty sales driving improved EBITDA margins.
Safety and Operational Excellence
Achieved 98% perfect days across all operations, maintaining a total recordable incident rate better than the industry's benchmark of 1.0.
Lowlights
Cinelease Business Challenges
Net income included an adjustment to the fair market value of the Cinelease business, currently an asset held for sale, due to slower-than-anticipated recovery in the studio entertainment industry.
Interest Rate Impacts
Interest rate sensitive end markets began slowing early in the second quarter of 2024, affecting local market growth and impacting fleet efficiency.
Local Market Slowdown
Slower local market growth due to elevated interest rates affected fleet efficiency and dollar utilization, impacting overall revenue performance.
Company Guidance
During the Herc Holdings Fourth Quarter and Full Year 2024 Earnings Call, the company provided guidance for 2025, highlighting several key financial metrics and strategic initiatives. Equipment rental revenue is expected to grow by 4% to 6%, supported by continued strength in mega projects and specialty solutions, while local markets remain flat. Gross fleet CapEx is projected between $700 million and $900 million, with a focus on specialty fleet. Adjusted EBITDA is anticipated to range from $1.65 billion to $1.75 billion, reflecting a 1% to 6% growth. The company emphasized its commitment to improving fleet efficiency and maintaining a strong balance sheet, with a leverage ratio within the target range. Additionally, Herc Holdings plans to support recent acquisitions and greenfield expansions, aiming to enhance its presence in the top 100 North American markets.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.