Company Reports

Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% return on invested capital) and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping it realize economies of scale and scope that are the building blocks of cost advantage. These are the fundamental traits that allow the firm to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

Herc Holdings reported 20% revenue growth, though it was weighed down by 50 basis points of adjusted EBITDA margin compression to 40.4% amid results that are still distorted by its transaction with H&E Equipment Services.

Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% ROIC), and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping the company realize economies of scale and scope, which are the building blocks of cost advantage. These are the fundamental traits that allow the company to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% ROIC) and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping the company realize economies of scale and scope, which are the building blocks of cost advantage. These are the fundamental traits that allow the company to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

Much like its peer, United Rentals, which reported earnings last week, Herc Holdings also saw strength in mega projects and specialty equipment rentals, complemented by stable local markets. Revenue and EBITDA growth of 32%-33% was clearly flattered by last year’s H&E acquisition.

Herc reported a 23% increase in sales to $4.4 billion on core equipment revenue rental growth of 18%. EBITDA margins of 41.5% compressed nearly 300 basis points on a combination of transaction-related costs, lower utilization, and elevated fleet disposals.

Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% ROIC) and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping the company realize economies of scale and scope, which are the building blocks of cost advantage. These are the fundamental traits that allow the company to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

Rental revenue increased nearly 30%, but adjusted EBITDA only increased 24%, reflecting 390 basis points of margin compression. Revenue, EBITDA, and capex outlook for 2025 was maintained.

Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% ROIC) and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping the company realize economies of scale and scope, which are the building blocks of cost advantage. These are the fundamental traits that allow the company to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

Herc Holdings reported year-to-date performance similar to equipment rental peers (4% rental revenue growth), but significant dissynergies at newly acquired H&E Equipment Services’ legacy business (negative 15%) and tough second-half comparisons led to a meaningful cut in 2025 guidance.

Herc Holdings’ management team has improved the business since it was spun out of Hertz in 2016, a time when returns were quite poor (sub-3% returns on invested capital) and the business was not a priority for the parent. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping Herc realize economies of scale and scope, which are the building blocks of cost advantage. These are the fundamental traits that allow the company to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR, EBITDA margin has increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more-complicated bundled solutions that generally capture gross margins 800-1000 basis points higher than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

Herc Holdings’ management team has truly improved the business since it was spun out of Hertz back in 2016, a time when returns were quite poor (less than 3% ROIC) and the business was not a priority for the parent company. Key actions included consolidating its supplier base, improving the fleet composition to better align with customers, integrating locations, and disposing of equipment more cost-effectively. These moves are helping the company realize economies of scale and scope, which are the building blocks of cost advantage. These are the fundamental traits that allow the company to outgrow its underlying market (average 4% compound annual growth rate). Since the spinout, revenue has increased at an 11% CAGR; EBITDA margins have increased by almost 1,000 basis points, and ROIC has increased by almost 800 basis points. Herc has achieved this through a blend of organic growth, greenfield site expansion, and acquisitions. Much like peers, Herc has added specialty rental capabilities (more complicated, bundled solutions that generally capture 800 basis points-1000 basis points higher gross margin than general equipment rental) and pursued more national accounts (customers spending more than $500,000 a year).

We are relaunching coverage on Herc Holdings, the third-largest player in the North American equipment rental market.

We will discontinue analyst coverage of Herc Holdings on or around July 8. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Herc reported solid performance in the first quarter. The market reacted positively by sending Herc’s shares up nearly 3.5% in intraday trading. Following the earnings update, we raised our fair value estimate by 5% to $166 per share, up from $158. Based on our cash flow projections, we think Herc’s shares are 8% undervalued. We have become more optimistic about the company’s prospects over the past couple of quarters. Demand has moderated from high levels but remains positive.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We saw no surprises in Herc’s fourth-quarter earnings, though the market sent shares down approximately 9% in intraday trading. We think the market was focused on the company missing consensus EPS estimates by a mid-single-digit rate and consensus sales estimates by a low-single-digit rate.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.

We believe Herc will continue to be a top-three player in the equipment rental industry. As one of the industry leaders, the company provides customers better equipment availability and reliability than smaller and regional players. However, many of the equipment brands found in Herc’s product catalog can also be found at other competitors, such as United Rentals, Sunbelt Rentals (owned by Ashtead), and thousands of other rental companies across North America.