United Rentals, Rental Service Corp. and Hertz Equipment Rental Corp. all sustained double-digit revenue drops in the first quarter of 2010 compared with 2009, arguably the worst year in the history of the equipment rental industry. On first glance, one might think, oh no, the freefall is continuing and 2010 will be worse than 2010 and who knows when or if we'll ever get out of this rental and construction recession.
But the numbers and the reality behind them bear a bit closer scrutiny and a bit more thought. HERC's president Gerry Plescia explained his views in a conversation with me the other day. In the first quarter of 2009, Plescia pointed out, January started off down, and then February got worse, and March got worse than February and on throughout the year, essentially each month bringing in less revenue than the month before it.
This year, however, it's just the reverse. Despite this being one of the harshest winters in recent memory, Plescia said almost from January 1, from the time the holidays were over, volume has improved. February was better than January and March was better than February. That's the normal pattern in the rental industry — it's usually slow after the holidays, it being, essentially, the dead of winter. Plescia's hope — views pretty similar to those expressed by United Rentals CEO Mike Kneeland and RSC CEO Erik Olsson — is that by the second half of the year, the company will see year-over-year volume growth rather than decline, and that the first quarter of 2010 is the bottom point of the recession.
OK, you might think, growth after last year isn't saying much. Maybe not when compared to the peak/boom years of the middle of this decade, but improvement is improvement and growth is growth and though it may start small, as long as the upward trajectory continues, those are good signs for the rental industry.
For HERC, positive signs were seen in the petrochemical industry, in Canada, where the oil sands work is improving as oil recently topped $80 a barrel, and in various other areas in the U.S. Transportation terminal work and railway projects, water and sewer projects, municipal work, state-funded work, stimulus projects just getting off the ground. The industrial market is showing signs of life.
Of course for those of you whose revenue is tied more exclusively to commercial construction or housing construction, this will not make you jump up and down. But almost any good news is good news these days. Or so it seems.