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.