The Baird/RER Q2 Rental Equipment Survey metrics were similiar to somewhat softer than the first quarter survey with the exception of average utilization, which snapped back to the prior range after dropping in the first quarter because of weather. Many smaller operators mentioned increased competitive presures from national rental companies, with minimal rental rate growth. Fleet sizes expanded in the mid-single digits, down somewhat from growth rates seen in 2017-2018. Anecdotal commentary noted continued strong end-market demand once the weather improved, with growth expected to continue into 2020, albeit more moderately.
Rental revenue grew an average of 5 percent in the second quarter year over year, the same as in the first quarter. Average rental rates increased 1.3 percent year over year in the second quarter, compared to a 1.8-percent year-over-year hike in the first quarter. Increased fleet sizes are driving heightened competitive rpessures while suppressing rental rate growth, especially for smaller rental companies, according to survey respondents.
One-third (33 percent) of respondents reported that used access equipment resale values are higher than in 2018, while 23 percent of respondents said used earthmoving equipment resale values are higher than 2018. The vast majority of remaining respondents said resale values were about the same as in 2018.
In the second quarter, respondents said 2019 revenue growth expectations averaged about 6 percent, which was below Q1 respondents’ forecast of 8.3 percent, but higher than the 5 percent growth realized in the second quarter. Respondends expect a 3.7-percent increase in fleet purchases during 2019, down from 4.8 percent last quarter. Respondents projected earthmoving equipment fleet purchases to be flat, while they expected access equipment purchase to grow 4 percent.
Respondents forecast rates to increase 1.4 percent in 2019, while first quarter respondents forecast a 2.2-percent rental rate hike for 2019.
Fleet utilization was 65 percent compared to 56 percent in the first quarter, but consistent with the 63 to 66 percent range from the previous six surveys. The utilization rate for access equipment, which makes up 36 percent of survey revenue, dropped modestly to 66.1 percent from 66.9 percent in the second quarter of 2018.
Growth in the cost of new units increased 2.6 percent, slightly below last quarter’s 2.8-percent gain.