HampE Equipment Services39 San Antonio branch The company posted a 91percent hike in rental revenue in the third quarter and expects strong rental activity in the coming year
H&E Equipment Services' San Antonio branch. The company posted a 9.1-percent hike in rental revenue in the third quarter and expects strong rental activity in the coming year.

Strong Rental Revenue Drives H&E Equipment Services in Third Quarter

H&E Equipment Services posted $118.1 million in rental revenue in the third quarter, a 9.1-percent increase compared to $108.2 million in the third quarter a year ago. However, sales of new equipment declined by 17.6 percent and total revenue for the company was an increase of less than 1 percent, from $275 million a year ago to $276.9 million in the recently concluded quarter.

Net income was $14.8 million in the third quarter compared to $15.3 million a year ago. EBITDA jumped 3.7 percent to $86.2 million, compared to $83.1 million a year ago, yielding a margin of 31.1 percent of revenues compared to 30.2 percent a year ago.

Average rental rates increased 1 percent compared to the year-ago quarter. Average time utilization based on original equipment cost was 73.7 percent compared to 74.1 percent a year ago and 70.3 percent in the second quarter of this year. Dollar utilization was 36.4 percent compared to 36.9 percent a year ago. Average rental fleet age on Sept. 30 was 32 months, down from 32.3 months at the end of the second quarter.

“Our rental business was again strong during the third quarter, with revenues increasing 9.1 percent from a year ago," said CEO John Engquist. "We also achieved positive rental rate growth and maintained industry-leading utilization levels. Demand in our industrial markets remains solid and we expect this momentum will continue into 2016, driven primarily by the vast number of significant capital projects planned along the Gulf Coast. In terms of our oil patch exposure, activity in our markets has stabilized and no significant fleet transfers were required during the quarter.”

Engquist’s outlook on the distribution portion of the business was slightly less bullish.

“While our business continues to perform well overall, we continue to have limited visibility into our distribution business. Our new equipment sales remain soft, primarily as a result of low demand for cranes. We do not expect the normal ramp-up in crane sales during the fourth quarter as we have experienced in previous years. With the weakness and lack of visibility in the in the distribution business, we now expect revenues to range from $1.028 billion to $1.037 billion and EBITDA in the range of $315 million to $320 million.”

Gross profit for H&E increased 1.9 percent to $92.8 million from $91.1 million in the third quarter of 2014. Gross margin was 33.5 percent for the recent quarter compared to 33.1 percent for Q314. Third quarter 2015 gross margin on equipment rentals was 49 percent compared to 50.5 percent in the year-ago frame because of higher rental expense as a percentage of equipment rental revenues.

Based in Baton Rouge, La., H&E Equipment Services is No. 7 on the RER 100.

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