Herc’s second quarter was marked by a significant disconnect between strong revenue growth and negative market sentiment. While the company’s sales exceeded Wall Street’s expectations, a steep decline in the share price followed management’s acknowledgment of ongoing pressures in local commercial construction and operational disruptions from the H&E Equipment Services acquisition. CEO Lawrence Silber emphasized that the integration process required stabilizing the workforce and addressing near-term weakness, particularly as local markets remained under pressure from higher interest rates and delayed project starts. As Silber noted, "local markets continue to see pressure as more commercial projects come to completion, while new projects remain on pause due to prolonged higher interest rates."
Is now the time to buy HRI? Find out in our full research report (it’s free).
Herc (HRI) Q2 CY2025 Highlights:
- Revenue: $1.00 billion vs analyst estimates of $937.5 million (18.2% year-on-year growth, 6.9% beat)
- Adjusted EPS: $1.87 vs analyst estimates of $1.63 (14.6% beat)
- Adjusted EBITDA: $406 million vs analyst estimates of $408.3 million (40.5% margin, 0.6% miss)
- The company lifted its revenue guidance for the full year to $3.8 billion at the midpoint from $1.61 billion, a 136% increase
- EBITDA guidance for the full year is $1.85 billion at the midpoint, below analyst estimates of $1.96 billion
- Operating Margin: 8.7%, down from 18.4% in the same quarter last year
- Market Capitalization: $4.02 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 Herc’s Q2 Earnings Call
- Robert Cameron Wertheimer (Melius Research) asked about future fleet capital needs and timing for integration-driven fleet right-sizing. CFO Mark Humphrey noted most fleet adjustments will occur in the back half of the year, with clarity on 2026 capital deployment coming after synergy ramp-up.
- Alec Ryu McGuire (JPMorgan) requested details on the pace and recovery rates of equipment dispositions. Humphrey said roughly $750 million in asset disposals are planned ratably over Q3 and Q4, with used equipment markets showing healthy demand.
- Kyle David Menges (Citigroup) pressed for clarity on free cash flow generation and baseline expectations post-integration. Humphrey replied that normalized free cash flow should reach 10-15% of revenue, though this year’s results are affected by partial-year H&E contributions.
- Ken Newman (KeyBanc Capital Markets) asked about the composition and timeline of cost synergies, particularly workforce reductions. Humphrey confirmed headcount reductions form a significant portion and that the process is on schedule for year-end targets.
- Mircea Dobre (Baird) questioned the cyclical versus structural nature of H&E’s revenue decline and whether further hiring or cost actions are needed. Humphrey indicated that most actions align with integration plans, and the focus remains on executing cost synergy milestones into early next year.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be monitoring (1) the pace of H&E integration and realization of both revenue and cost synergies, (2) the stabilization and potential recovery of local commercial construction markets, and (3) the growth of specialty equipment rental as a driver of higher margins. Execution on fleet optimization and updates on project pipeline wins will also be key signposts for progress.
Herc currently trades at $121.18, down from $150.03 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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