H&E Equipment Services posted $316.9 million in rental revenue in the fourth quarter of 2023 compared to $275.7 for the fourth quarter of 2022, a 14.9-percent increase. Total revenue for the fourth quarter totaled $385.8 million compared to $353.1 million in the fourth quarter of 2022, a 9.3-percent hike. Sales of rental equipment for the fourth quarter were $40.6 million compared to $30.2 million in the fourth quarter of 2022, a 34.3 percent jump. Sales of new equipment decreased significantly from $21.5 million in the fourth quarter of 2022 to $9.8 million in the fourth quarter of 2023 as H&E continued its transition to being a pure rental company away from the rental/dealership model it pursued in the past.
For the full year, H&E topped $1 billion in rental revenue for the first time at $1,186.2 million compared to $956 million for the fourth quarter of 2022, a 24.1-percent hike. Total revenue for the full year 2023 totaled $1,469.2 million compared to $1,244.5 million in 2022, an 18.1-percent incline.
For the full year of 2023, sales of rental equipment nearly doubled at $165.1 million, compared to $90.9 million for the full year of 2022, an 81.8 percent increase as better availability of new equipment allowed rental companies to sell more of their used fleet. Sales of new equipment diminished significantly for the full year, dropping from $92.5 million to $39.1 million in revenue.
Average time utilization (based on original equipment cost) was 68.4 percent, compared to 72.0 percent. The company’s rental fleet, based on original equipment cost, ended 2023 at approximately $2.8 billion, representing an 18.3-percent increase. Average rental rates improved 3.8 percent from the year-ago quarter and 0.8 percent on a sequential quarterly basis. Dollar utilization was 40.3 percent compared to 41.9 a year ago.
Average rental fleet age on December 31, 2023, was 39.7 months compared to an industry average age of 49.0 months.
“Strong execution of strategic initiatives and resilient non-residential activity resulted in healthy financial metrics throughout the year,” said CEO Brad Barber. “Total revenues in the fourth quarter improved 9.3 percent compared to the year-ago quarter, while rental revenues grew 14.5 percent over the same period, resulting in a rental margin of approximately 54.2 percent. For the full year, total revenues set a company record of just under $1.5 billion, representing an 18.1 percent increase compared to total revenues in the previous year. Over the same period, rental revenues grew 24.1 percent, exceeding $1.0 billion for the first time, and completed the year with an average margin of 52.1 percent. Indicative of the durable industry fundamentals, rental rates in the fourth quarter improved 3.8 percent compared to the same quarter in 2022, and 0.8 percent on a sequential quarterly basis. For the full year, rental rates were 5.6 percent better than 2022. Our strategic accomplishments in 2023 included a record gross fleet investment totaling $737 million, exceeding our revised target range for the year. We completed the year with a fleet original equipment cost (OEC) of approximately $2.8 billion, or 18.3 percent greater than our fleet OEC at the conclusion of 2022. Our average fleet age of 39.7 months remained among the youngest in the industry."
Expansion helps to fuel growth
Barber talked about the company’s continuing expansion efforts. “The pace of branch expansion remained impressive throughout 2023, further strengthening the company’s competitive position. The success of our accelerated branch expansion program led to a record 14 branch additions in 2023, including three new locations in the fourth quarter. These branch additions established greater density in the Gulf Coast, Mid-Atlantic, Southeast and Midwest regions, providing the company with increased exposure to new projects. Also, additional growth and improved positioning was accomplished through the acquisition of attractive and well-managed businesses with operations in core metropolitan statistical areas of the U.S. One transaction, which closed in the fourth quarter, added three locations in California, increasing the number of branch additions to 17 in 2023, or a 14-percent increase across our branch network when compared to the branch count at the conclusion of 2022."
Barber said H&E will slow gross fleet expenditure to a range of $450 million to $500 million in 2024.
“We believe our record fleet expenditures in 2023 and young fleet age advantageously position the company to address the ongoing growth in construction markets and these factors should support steady improvement in physical utilization. Regarding our branch network, new branch growth will remain a fundamental component of our strategic plans in 2024 with 12 to 15 new locations expected in our branch expansion program. In addition, branch growth could be enhanced through attractive acquisition opportunities that offer access to vibrant construction markets in the U.S., as demonstrated by our latest acquisition which closed in early 2024, adding one location each in Phoenix and Denver.”
Barber views the 2024 outlook with optimism and encouragement. “Commentary from our customers regarding pending construction opportunities in 2024 remains optimistic and supports a business climate characterized by stable to modestly higher non-residential and industrial activity. Construction starts are projected to grow on a year-over-year basis with the growth reinforced by mega projects and increased spending on infrastructure programs. Also, we remain confident that expanding rental penetration will be a meaningful catalyst for increased industry growth.”
H&E Equipment Services, based in Baton Rouge, La., is No. 5 on the RER 100.
