Standard & Poor’s Ratings Services’ analysis of three equipment rental companies reveals significant industry challenges according to a commentary published by RatingsDirect. The report, A Look at the Risk Profiles of Three U.S. Equipment Rental Companies, identifies common industry issues such as a highly fragmented and competitive business environment, high capital intensity because of the high cost of equipment purchases, and limited influence in pricing.
The three companies, United Rentals, RSC Equipment Rental and H&E Equipment Services, along with most other rental companies, face a serious downturn in nonresidential construction and intensifying rental rate pressures.
“Overall, we consider the equipment rental industry to have weak industry risk characteristics,” said Standard & Poor’s credit analyst Helena Song. “However, favorable long-term growth prospects such as the trend toward renting rather than owning due to customer outsourcing and increasing access to asset-based financing, partly offset industry difficulties.”