H&E Equipment Services Sees Resurgence in Stock Performance

Photo of author
Written By Kevin MacDonald

H&E Equipment Services (NASDAQ: HEES) has recently seen a resurgence in its stock performance as the company aggressively pursues a mergers and acquisitions (M&A) strategy.

This approach complements the company’s organic growth initiatives, creating robust expansion prospects.

However, there are aspects of the business, such as leverage and valuation, that raise concerns, which lead to a cautious approach toward total investment confidence at this stage.

Company Background and Service Portfolio

Established in 1961, H&E Equipment Services operates across approximately 30 states, offering rental services for a diverse range of equipment.

Credit: DepositPhotos

This includes aerial work platforms, material handling, and earth-moving equipment. The company primarily serves sectors outside the residential market, accounting for 70% of its revenues, with the remainder distributed among industrial, residential, oil & gas, and other sectors.

Historically, H&E has maintained annual sales of around $1 billion, but recent strategic expansions have pushed revenues toward $1.5 billion.

Financial Performance and Operational Metrics

In 2023, H&E Equipment Services reported an 18% increase in total revenues, amounting to $1.47 billion, with equipment rentals comprising 80% of sales.

The company’s operating profits stood at $277 million, reflecting operating margins near 19%.

Despite these strong figures, the fourth quarter showed a slowdown in growth, with revenue increases halving compared to the annual rate, influenced by reduced pricing power and a utilization rate decrease to 68.4%.

Valuation and Market Position

With a net debt of $1.43 billion and a modest leverage ratio of 2 times against an EBITDA of $673 million, the company’s financial structure is relatively stable.

The equity valuation of H&E stands at $2.16 billion, with an enterprise value of $3.6 billion, translating into a valuation of about 2.5 times sales and just over 5 times EBITDA. Despite these figures, the company’s earnings multiple remains at 13, suggesting a conservative market assessment compared to its historical performance and sector standards.

M&A Strategy and Future Outlook

H&E has been active on the M&A front, with several acquisitions bolstering its operational capabilities and market reach.

Notable acquisitions include Giffin Equipment and Precision Rentals, enhancing the company’s asset base significantly.

These strategic moves are expected to incrementally boost H&E’s operational footprint and financial metrics.

However, the capital-intensive nature of these acquisitions, coupled with $737 million invested in fleet expansion in 2023, has led to substantial cash outflows, highlighting a potential financial concern.

Industry Comparison and Competitive Landscape

When compared to industry giant United Rentals, which boasts a market valuation significantly higher at approximately $55 billion, H&E’s smaller scale and modest valuation are evident.

Credit: DepositPhotos

United Rentals enjoys superior operating margins and a more substantial revenue base, underscoring the advantages of scale and market diversification that H&E currently lacks.

However, H&E’s recent fleet renewal, leading to a younger average fleet age than industry norms, positions it well for future growth and operational efficiency.

Investment Perspective

While the operational momentum from organic growth and strategic acquisitions is promising, financial prudence in H&E shares is advisable.

The potential for improved cash flow in the coming years, coupled with a more robust asset base, presents a favorable outlook.


You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of SmallCapStocks.com (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.

The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov; the Financial Industry Regulatory Authority (the "FINRA") at www.FINRA.org, and relevant State Securities Administrator website and the OTC Markets website at www.otcmarkets.com. The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at www.sec.gov/consumer/cyberfr.htm, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.

The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.

By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: www.SmallCapStocks.com/Disclaimer and www.SmallCapStocks.com/Privacy-Policy

By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.