Herc Holdings (HRI) is in the equipment rental business to customers that want to build or repair something, explains Tom Bishop, small cap expert and editor of BI Research.
It rents a variety of different boom/crane equipment, forklifts and other material handling equipment, scissor platforms, any kind of earthmoving equipment, paving equipment, pumps, fans, all manner of trucks and trailers, tools, generators — even equipment for making movies and TV shows and for putting on big events. Herc has $4.6 billion of equipment to rent and 313 locations.
The company released a strong Q1 report including a 25% increase in Q1 revenues to $567 million, which was above the consensus. Adjusted EPS of $1.95 was miles above last year’s $1.10 and basically spot on the unguided consensus of $1.96.
Management does not give EPS guidance, but does give EBITDA guidance and it raised that guidance for 2022 by $100 million to a range of $1.175 billion to $1.245 billion — which would be a 31% to 39% increase over 2021.
And business is so good that the company also raised its guidance for net rental equipment capital expenditures by another $40 million to a mid-point of $1.0 billion. I thought the press release and conference call were very positive. Oh, and the average stock price target is $205.
Moreover, the 2022 EPS consensus calls for 60% growth to $12.14, which equates to a sniveling PE of 9 for a company forecasted to grow EPS 60% this year — and the stock has dropped 30% over the past month. Yes, the market cratered (about 15% over this same period), but this is ridiculous. Misguided price action, in my opinion, makes this stock a table-pounding buy.
What’s that they say? You can lead a horse to water, but you can’t make it drink. I can’t explain it and I have been topping off my positions in the stock in every account. So obviously I continue to rate the stock a "strong buy". The initial recommendation price was $97.56, so we still have a 15% gain. But I can’t help thinking there is a lot more on the table.
