Custom Truck One Source’s fourth quarter was met with a negative market reaction as its sales growth lagged Wall Street’s expectations. Management pointed to continued strength in the rental business, highlighting record utilization rates and ongoing demand in transmission and distribution (T&D) markets. CEO Ryan McMonagle described customer activity in the rental segment as “the highest in almost three years,” with the fleet utilization peaking at nearly 84%. However, management acknowledged that equipment sales (TES) faced headwinds from customers pulling forward purchases earlier in the year, as well as some deferred deliveries.
Is now the time to buy CTOS? Find out in our full research report (it’s free for active Edge members).
Custom Truck One Source (CTOS) Q4 CY2025 Highlights:
- Revenue: $528.2 million vs analyst estimates of $581 million (1.4% year-on-year growth, 9.1% miss)
- Adjusted EPS: $0.13 vs analyst estimates of $0.06 (significant beat)
- Adjusted EBITDA: $120.7 million vs analyst estimates of $115.8 million (22.9% margin, 4.2% beat)
- EBITDA guidance for the upcoming financial year 2026 is $422.5 million at the midpoint, in line with analyst expectations
- Operating Margin: 9.8%, down from 12.9% in the same quarter last year
- Backlog: $335.3 million at quarter end, down 9.1% year on year
- Market Capitalization: $1.40 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Custom Truck One Source’s Q4 Earnings Call
- Daniel Hultberg (Oppenheimer) asked about factors supporting the upper end of guidance and price contributions. CEO Ryan McMonagle cited strong T&D demand and potential vocational market growth as key, noting recent price increases passed through to customers.
- Michael Shlisky (D.A. Davidson) questioned whether high utilization rates are sustainable with reduced fleet investment. McMonagle responded that mid-to-high 70s percent utilization remains the target, but strong execution and a younger fleet age support current high levels.
- Justin Hauke (Robert W. Baird) asked about TES segment order trends and the impact of emissions standards. McMonagle noted sequential backlog growth and stable relationships with chassis suppliers, while also watching for any pre-buy impact from upcoming EPA mandates.
- Naim Kaplan (Deutsche Bank) inquired about vocational market strength and margin outlook. McMonagle highlighted improving order trends and confidence in vocational demand, while CFO Eperjesy stated that TES margins are targeted within a 15-18% range, with ERS margins benefiting from higher utilization.
- Abe Landa (Bank of America) asked about inventory reduction targets and the rationale for segment realignment. Eperjesy explained that inventory is targeted below six months on hand, and the new reporting structure will better reflect the distinct nature of each business segment.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) progress on inventory and working capital reductions to support free cash flow, (2) the impact of the HyAV partnership and expanded aftermarket services on TES segment growth, and (3) the transition to the new two-segment reporting for improved transparency. Execution on these initiatives and sustained rental demand will be key areas to watch.
Custom Truck One Source currently trades at $6.16, down from $6.38 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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