H&E Equipment Services (HEES) Tops Q3 EPS by 11c, Revenues Beat

H&E Equipment Services (NASDAQ: HEES) reported Q3 EPS of $0.79, $0.11 better than the analyst estimate of $0.68. Revenue for the quarter came in at $353 million versus the consensus estimate of $341.41 million.

THIRD QUARTER 2019 SUMMARY

• Revenues increased 9.6% to $353.0 million versus $322.1 million a year ago.
• Net income increased 33.4% to $28.4 million in the third quarter compared to net income of $21.3 million a year ago. The effective income tax rate was 26.7% in the third quarter of 2019 and 26.4% in the third quarter of 2018.
• Adjusted EBITDA increased 17.9% to $127.5 million in the third quarter compared to $108.2 million a year ago, yielding a margin of 36.1% of revenues compared to 33.6% a year ago.
• Total equipment rental revenues for the third quarter of 2019 were $204.1 million, an increase of $31.4 million, or 18.2%, compared to $172.8 million a year ago (as adjusted).(1) Rental revenues (as previously reported) for the third quarter of 2019 were $184.8 million, an increase of $28.8 million, or 18.4%, compared to $156.0 million in the third quarter of 2018.(1)
• New equipment sales decreased 4.7% to $65.0 million in the third quarter compared to $68.2 million a year ago.
• Used equipment sales increased 2.9% to $31.2 million in the third quarter compared to $30.3 million a year ago.
• Gross margin was 37.4% compared to 35.6% a year ago. The increase in gross margin was largely the result of a shift in revenue mix to rentals and higher equipment rental gross margins.
• Total equipment rental gross margins were 46.3% in the third quarter of 2019 compared to 45.2% in the third quarter of 2018 (as adjusted).(1) Rental gross margins (as previously reported) were 50.8% in the third quarter of 2019 compared to 50.0% a year ago.(1)
• Average time utilization (based on original equipment cost) was 71.4% compared to 71.0% a year ago. The size of the Company’s rental fleet based on original acquisition cost increased 12.3% from a year ago, to $2.0 billion.

Brad Barber, H&E Equipment Services’ chief executive officer and president, said, “Our third quarter results were solid as we continued to experience broad-based demand for rental equipment throughout our end-user construction markets. We achieved a 2.4% improvement in rates compared to a year ago and physical utilization increased 40 basis points to 71.4%, which helped drive an 18.4% increase in rental revenues.”

Barber concluded, “We are pleased with our year-to-date performance and ability to capitalize on the ongoing strength and opportunities in the well-diversified construction markets we serve throughout our 23-state footprint. Increasing the scale of our rental business continues to be a strategic priority for our business. We expect to achieve this goal through organic growth, acquisitions and warm-start store openings. Based on our current performance, solid level of project activity and our customers’ feedback, our market outlook remains positive.”

For earnings history and earnings-related data on H&E Equipment Services (HEES) click here.

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