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H&E Equipment (HEES) Up 68% in 6 Months: More Room to Run?
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Shares of H&E Equipment Services (HEES - Free Report) have gained 67.6% in the past six months, outperforming the industry’s 30.7% increase. The Industrial Products sector has gained 8.5% while the Zacks S&P 500 composite has declined 2.8% in the same time frame.
HEES has a market capitalization of around $2 billion. The average volume of shares traded in the last three months was about 266.96k.
Favorable rental demand, a solid acquisition strategy as well as focus on expanding its fleet and stores continue to drive H&E Equipment Services’ shares.
H&E Equipment Services has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2023 earnings has moved 3% north, while the same for 2024 has moved up 6% in the past 30 days, reflecting analyst optimism.
Can It Retain the Momentum?
The company recently reported solid fourth-quarter 2022 results, delivering year-over-year improvement in both its top and bottom lines and also surpassing the respective Zacks Consensus Estimate. The results benefited from solid fleet utilization, continued gains in equipment pricing, fleet and branch expansion. The inclusion of operations from One Source Equipment Rentals, Inc. ("One Source"), following the closing of its acquisition on Oct 1, 2022, also contributed to the results. Physical fleet utilization remained at a healthy level, averaging 72.0% at the end of the fourth quarter.
Rental rates (excluding One Source) improved 10.6% year over year and 1.8% sequentially – which remain among the best in the industry. The company’s fleet original equipment cost was a record $2.4 billion at the quarter end. H&E Equipment opened two new branch locations in the quarter, closing the year with a total of 10 branch openings.
The company is expected to benefit from the favorable demand trend in the equipment rental industry. Strong project backlogs and an increase in spending aided by federally funded programs, particularly in the non-residential and industrial end markets will support its top-line growth. Owing to the rising interest rates and ongoing delays in equipment deliverability, customers are now shifting toward renting equipment rather than owning them, which bodes well for H&E Equipment. The company recently signed an agreement to sell its Komatsu earthmoving distribution business, which combined with the sale of its crane business completed in 2021, makes it a pure-play rental business. HEES can focus on growing in the high-margin equipment rental business.
The company also remains focused on expanding its branch network, having set a target of opening 10 to 15 new locations in 2023, up from 10 new branches in each of the last two years. It is also aiming for a gross fleet investment of $500 million to $550 million as it continues to support existing stores and the new branch locations with a new fleet and a diversified mix of equipment lines. It also expects to boost its growth through acquisitions.
The Zacks Consensus Estimate for HEES’ 2023 earnings indicates an improvement of 7.8% from the year-ago reported figure due to 9.6% higher revenues. The consensus estimate for 2024 earnings indicates an improvement of 6.9% from the year-ago reported figure with revenues expected to rise 6.5%. The expected long-term earnings growth rate is pegged at 10%.
Alamo Group has an average trailing four-quarter earnings surprise of 6%. The Zacks Consensus Estimate for ALG’s 2023 earnings is pegged at $9.79 per share. This indicates a 13.6% increase from the prior-year reported figure. The consensus estimate has moved north by 7% in the past 30 days. ALG shares have gained 40% in the past six months.
OI Glass has an average trailing four-quarter earnings surprise of 16.5%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.57 per share. This indicates an 11.7% increase from the prior-year reported figure. The consensus estimate for OI’s 2023 earnings has moved up 2% in the past 30 days. OI’s shares have gained 58% in the past six months.
The Zacks Consensus Estimate for Grainger’s fiscal 2023 earnings per share is pegged at $33.03, suggesting an increase of 11.4% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 1% upward in the last 30 days. GWW has a trailing four-quarter average earnings surprise of 9.8%. Its shares have gained 21% over the past six months.
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H&E Equipment (HEES) Up 68% in 6 Months: More Room to Run?
Shares of H&E Equipment Services (HEES - Free Report) have gained 67.6% in the past six months, outperforming the industry’s 30.7% increase. The Industrial Products sector has gained 8.5% while the Zacks S&P 500 composite has declined 2.8% in the same time frame.
HEES has a market capitalization of around $2 billion. The average volume of shares traded in the last three months was about 266.96k.
Favorable rental demand, a solid acquisition strategy as well as focus on expanding its fleet and stores continue to drive H&E Equipment Services’ shares.
H&E Equipment Services has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2023 earnings has moved 3% north, while the same for 2024 has moved up 6% in the past 30 days, reflecting analyst optimism.
Can It Retain the Momentum?
The company recently reported solid fourth-quarter 2022 results, delivering year-over-year improvement in both its top and bottom lines and also surpassing the respective Zacks Consensus Estimate. The results benefited from solid fleet utilization, continued gains in equipment pricing, fleet and branch expansion. The inclusion of operations from One Source Equipment Rentals, Inc. ("One Source"), following the closing of its acquisition on Oct 1, 2022, also contributed to the results. Physical fleet utilization remained at a healthy level, averaging 72.0% at the end of the fourth quarter.
Rental rates (excluding One Source) improved 10.6% year over year and 1.8% sequentially – which remain among the best in the industry. The company’s fleet original equipment cost was a record $2.4 billion at the quarter end. H&E Equipment opened two new branch locations in the quarter, closing the year with a total of 10 branch openings.
The company is expected to benefit from the favorable demand trend in the equipment rental industry. Strong project backlogs and an increase in spending aided by federally funded programs, particularly in the non-residential and industrial end markets will support its top-line growth. Owing to the rising interest rates and ongoing delays in equipment deliverability, customers are now shifting toward renting equipment rather than owning them, which bodes well for H&E Equipment. The company recently signed an agreement to sell its Komatsu earthmoving distribution business, which combined with the sale of its crane business completed in 2021, makes it a pure-play rental business. HEES can focus on growing in the high-margin equipment rental business.
The company also remains focused on expanding its branch network, having set a target of opening 10 to 15 new locations in 2023, up from 10 new branches in each of the last two years. It is also aiming for a gross fleet investment of $500 million to $550 million as it continues to support existing stores and the new branch locations with a new fleet and a diversified mix of equipment lines. It also expects to boost its growth through acquisitions.
The Zacks Consensus Estimate for HEES’ 2023 earnings indicates an improvement of 7.8% from the year-ago reported figure due to 9.6% higher revenues. The consensus estimate for 2024 earnings indicates an improvement of 6.9% from the year-ago reported figure with revenues expected to rise 6.5%. The expected long-term earnings growth rate is pegged at 10%.
Zacks Rank & Stocks to Consider
HEES currently carries a Zacks Rank #3 (Hold).
Some top-ranked stocks from the Industrial Products sector are Alamo Group (ALG - Free Report) , OI Glass (OI - Free Report) and W.W. Grainger (GWW - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Alamo Group has an average trailing four-quarter earnings surprise of 6%. The Zacks Consensus Estimate for ALG’s 2023 earnings is pegged at $9.79 per share. This indicates a 13.6% increase from the prior-year reported figure. The consensus estimate has moved north by 7% in the past 30 days. ALG shares have gained 40% in the past six months.
OI Glass has an average trailing four-quarter earnings surprise of 16.5%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.57 per share. This indicates an 11.7% increase from the prior-year reported figure. The consensus estimate for OI’s 2023 earnings has moved up 2% in the past 30 days. OI’s shares have gained 58% in the past six months.
The Zacks Consensus Estimate for Grainger’s fiscal 2023 earnings per share is pegged at $33.03, suggesting an increase of 11.4% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 1% upward in the last 30 days. GWW has a trailing four-quarter average earnings surprise of 9.8%. Its shares have gained 21% over the past six months.