02.03.2017

Another tough quarter for H&E

US sales and rental company H&E Equipment has reported a fall in both full year and quarterly revenues and profits

looking at the full year, total revenues fell almost six percent to $978.1 million, due mainly to lower new and used equipment sales which fell 17 and 18 percent respectively, Rental revenues actually edged up half a percent. Pre-tax profits dropped 22 percent to $59 million. Rental rates fell 0.6 percent over the year, while physical utilisation fell 1.2 percent 69.7 percent, with a slightly larger fleet.

In the fourth quarter total revenues fell 10.6 percent to $244.3 million with rental revenues edging up marginally, to $115 million, while new equipment sales decreased 28.5 percent to $44.9 million and used equipment sales fell 29.2 percent to $24.9 million. Parts sales increased 1.7 percent to $27.2 million, while service revenues dropped seven percent to $15.4 million. At the same time pre-tax profits were almost 18 percent lower at $16.86 million.
On average, rental rates during the quarter were 1.1 percent lower, while utilisation dropped 1.7 percentage points to 70.3 (72 percent in 2015). The average age of the fleet is now 33 months.

Chief executive John Engquist said: “2016 was a solid year for our company and industry as the strength in the non-residential construction markets continued into the fourth quarter. Demand for rental equipment was healthy, with both revenues and margins up slightly from a year ago. Ongoing weakness in crane demand continued to negatively affect our distribution business, with new and used crane sales down $23 million on a combined basis.”

“We are extremely encouraged about the trends and opportunities for our business in 2017 and beyond. Customer sentiment was positive prior to the election but it has improved further post-election according to many metrics. While substantial uncertainty exists regarding the new administration’s proposed infrastructure stimulus plan in terms of total funding, project mix and timing, a material spend could fuel solid industry growth and extend the cycle for years. While it is unlikely the industry would benefit from any infrastructure spending until 2018 at the earliest, we do believe the new administration’s pro-business position could accelerate construction spending in 2017.”

“The energy markets are also improving as shale drillers in the Permian and Eagle Ford Basins are ramping up exploration activity as they expect to generate positive returns at current oil prices. For the first time since 2014, we opportunistically moved fleet back into select energy focused markets during the fourth quarter.”

Vertikal Comment

These numbers are disappointing, although predictable given the uncertainty that is surround the new president in the US and the slower oil & gas activity.
There are however some attractive opportunities for the company which should see a stronger pick up in the second half of the year. Watch this space