Herc Rentals Prepares for H&E Integration and Continues with Strong Business Opportunities
Herc Rentals is continuing its expansion strategy with the pending merger agreement to acquire H&E Equipment Services and is completing three greenfield locations, CEO Larry Silber told a conference call of investors last week. Herc also opened three new facilities in the first quarter, but, Silber said, is pausing other M&A initiatives for the time being.
“The H&E acquisition, like others before it, helps to drive revenue and fleet efficiencies in key metropolitan areas in line with our urban market growth strategy,” Silber said. “In addition to its desirable locations, H&E brings complementary fleet categories, valuable new team members with a strong cultural fit, and greater local account presence while improving our national account capabilities. At its core, the acquisition strategy for H&E is no different than the strategy used for the other 50-plus acquisitions we’ve completed. And while it’s our largest, we view this as quite manageable.”
Silber said the company is continuing to increase specialty fleet CapEx.
“Specialty Solutions are a resilient product addressing urgent supplemental and critical demand situations,” Silber said. “Technology is another important value driver for Herc. We continue to advance our proprietary internal applications for pricing, fleet management logistics and transportation, while delivering more value to our customers through our industry-leading pro-control account platform.”
Silber said the company’s operating landscape is currently a tale of two contrasting trends.
“Our national account business is growing, fueled by federal and private funding for large construction projects like data centers, manufacturer insuring and LNG facilities,” he said. “We are not seeing any emerging cancellation trends or changes in the level of activity or scope of projects for 2025. And we are not seeing any unusual level of delays outside the normal course for modifying designs, juggling permits or securing labor. It's too early to tell how that unfolds as developers get clarity around the administration's policy outcomes. Today it seems it's business as usual for the large national accounts.”
Local business challenges
Local business, however, is more challenging.
“While there are ongoing opportunities in facility maintenance, municipal and infrastructure projects and the stalwart education and health care end markets, other more interest rate-sensitive jobs continue to be on hold, restricting overall local account growth. With interest rates remaining high, it's not getting any better, but it continues to be manageable for those of us with diverse end markets, customers, product offerings and geographic coverage. If you don't have other opportunities to pivot to, it's definitely a challenging local operating environment. Having said that, there's no real significant change for us in the local marketplace.”
On the issue of tariffs, Silber noted, Herc doesn’t expect any direct impact to its procurement costs in 2025 as the company sources the majority of its fleet domestically and orders of pricing for this year have already been secured. “Regarding any indirect impact that might stem from our customers’ tariff exposure, it’s too early to tell, but the national account projects already underway and those that are scheduled to launch this year, as far as we know now, there have been no changes to existing plans.”
Silber said the H&E acquisition process is proceeding as expected and with a combined 6 percent share nationally, “we won’t have any unmanageable areas of concern.”
He added that the company started preparing for the integration based on a targeted midyear closing. “Our integration management office is led by one of our most senior field executives. Our integration team, which includes leaders, HR, IT and field operations has organized around the drivers of value and the operating model.”
Chief operating officer Aaron Birnbaum addressed continuing business opportunities.
“Despite the slowdown of local project starts as interest rates remain elevated, we are expanding in select regions where infrastructure, education, local utilities and facility maintenance repair projects are underway,” he said. “On the actual account side, government and private funding for new large mega projects is still quite robust. We're continuing to win our targeted end to 15 percent share of the project opportunities with several new mega projects on deck this year and the 2024 projects still ramping up.
“Industrial Info Resources is projecting 2025 to be another strong year of capital and maintenance spending at $503 billion. Dodge's forecast for nonresidential construction starts in 2025 is estimated to increase 8 percent to $482 billion. Additionally, there's another $357 billion in infrastructure projects forecasted for 2025. That's also an 8 percent increase over 2024. The dotted line on these charts reflects growth over pre-pandemic peak levels. You can see that this year and the next three years are currently projected to be some of the strongest periods of activity that this industry has seen.”
For more details on Herc’s first quarter performance, click on: https://www.rermag.com/news-analysis/headline-news/article/55285393/herc-rentals-total-revenue-jumps-71-percent-in-first-quarter-of-2025
