Increased rental revenues led the way as H&E Equipment Services posted a 17.4 percent revenue jump in fourth quarter earnings – to $346 million – compared to $294.7 million a year ago.
For the full year, new equipment sales soared by 29 percent compared to 2017. And the outlook for 2019 is positive as both rental revenues and construction activity remain in an upswing, according to CEO and President Brad Barber.
Drilling down on fourth-quarter details, the company reports:
- Equipment rental revenues increased 27.6 percent to $163.0 million. That’s compared with $127.7 million in the fourth quarter of 2017.
- New equipment sales increased 7.1 percent to $79.7 million from $74.4 million a year ago.
- Used equipment sales increased 17.8 percent to $37.8 million, compared to $32.1 million a year ago.
- Parts sales increased 9.1 percent to $30.5 million from $28 million in the fourth quarter of 2017.
- Service revenues decreased 3.3 percent to $15.2 million compared to $15.8 million a year ago.
The company’s gross margin was 35.6 percent compared to 34.2 percent a year ago. The increase in gross margin was the result of a shift in revenue mix to higher margin rental revenues combined with strong operating performance from several business segments, H&E says.
Rental gross margins were steady, at 51.5 percent in the fourth quarter of 2018 compared to 51 percent a year ago.
“As a result of strong demand for rental equipment and new machinery combined with solid execution throughout our business,” Barber stressed, “fourth quarter total revenues increased 17.4 percent and adjusted EBITDA increased 26.2 percent from a year ago.
“Project activity in the non-residential construction markets remained healthy, and we continued to achieve rate improvement and high physical utilization levels, which drove a 27.6 percent increase in rental revenue from the prior year quarter,” he explains.
“New equipment sales exceeded our expectations, increasing 7.1 percent from a year ago, which we believe to be a tough comp. The increase in new equipment sales was largely due to higher aerial and crane sales, up 95.5 percent and 5.7 percent, respectively.”
Here are more results:
- The size of the company’s rental fleet based on original acquisition cost increased 25.7 percent from a year ago, to $1.8 billion.
- Average rental rates increased 2 percent compared to a year ago and 0.5 percent sequentially, a press release says.
- Average time utilization (based on original equipment cost) was 72.9 percent compared to 74.2 percent a year ago.
- Dollar utilization was 37 percent in the fourth quarter compared to 36.2 percent a year ago.
A younger fleet
Average rental fleet age at December 31, 2018, was 34.5 months, compared to an industry average age of 45.4 months.
At the end of the fourth quarter of 2018, the original acquisition cost of the company’s rental fleet was $1.8 billion, an increase of $361 million from the end of the fourth quarter of 2017, H&E says.
2018 full-year results strong
For the the full year of 2018, H&E reports:
- Total revenues increased 20.3 percent, or $208.9 million, to $1.2 billion in 2018 from $1.0 billion in 2017.
- Equipment rental revenues increased 23.6 percent to $592.2 million compared with $479.0 million in 2017.
- New equipment sales increased 29.3 percent to $262.9 million from $203.3 million a year ago. Used equipment sales increased 16.6% to $125.1 million compared to $107.3 million a year ago.
- Parts sales increased 5.4% to $120.5 million from $114.3 million in 2017. Service revenues increased 1.0% to $63.5 million from $62.9 million a year ago.
Industry growth fuels positive outlook
“Our outlook for 2019 is positive as industry rental revenues are forecast to increase, growth in the non-residential construction markets is expected to continue and our larger contractor customers remain confident about the level of projects in their pipelines,” says Barber.
“Even with a fleet size that is 25.7 percent, or $361 million by original acquisition cost – larger than a year ago – physical utilization is currently running above year-ago levels.
“We remain focused on additional growth through acquisitions and warm starts,” he says, “with two acquisitions in 2018 and our recent purchase of Texas-based We-Rent-It.”