02.03.2018

Strong fourth quarter for H&E

US based sales and rental company H&E Equipment Services has reported a strong fourth quarter in terms of revenue and profit.

Looking first at the full year numbers revenues were 5.3 percent higher at $1.03 billion with improvements in both new and used equipment sales, rental and services. Pre-tax profits were only marginally higher though at $59.3 million due mostly to fees for early termination of its long term debt and merger break up costs.
In the fourth quarter revenues were 20.6 percent higher driven by a steep rise in new equipment sales, especially earth moving equipment, while rental revenues were almost 11 percent higher. Pre-tax profits leapt more than 63 percent to $27.6 million.

Chief executive John Engquist said: “Solid performance by both our rental and distribution businesses drove a 20.6 percent increase in revenues for the fourth quarter compared to the year ago period. The non-residential construction markets were exceptionally strong, resulting in extremely high demand for rental equipment. Physical utilization increased nearly 400 basis points to 74.2 percent for the quarter and we achieved a one percent increase in rates from the prior year. Rental revenue increased 10.9 percent and margins increased 330 basis points to 51 percent compared to the year ago quarter. Increased demand for new cranes and earthmoving equipment drove a 65.9 percent improvement in new equipment sales. We are extremely pleased with our results and the current trends in our end-user markets.”

“We expect 2018 to be a very opportunistic year for our business and industry given the current strength in the non-residential construction markets. Oil prices are above a year ago, resulting in a rebound in exploration activity and energy-related projects. The new tax reform plan could also drive increased investment in construction. Should the administration and Congress pass an infrastructure bill, we believe the industry could see an expanded cycle. We also believe our operating environment is positive and we are focused on expanding our business in terms of both fleet size and geographic footprint. Our recent acquisition of CEC is representative of the types of acquisitions we intend to pursue - acquisitions which are very complementary to our business and increase our density in active markets or allow us to enter new markets. We also plan to continue our Greenfield or warm start expansion strategy.”

Vertikal Comment

All in all a very good year for H&E which is really hitting its stride, the company is well structured worth a good mix of products in both its sales and rental operations, with excellent market coverage but still plenty of scope for more expansion via bolt on acquisitions and organic growth.

With the traditional oil patch looking to step up investment and spending the company has a good chance to be firing fully on all cylinders this year.