Goldman Sachs Sees Value In Equipment Renters (HTZ, OSK)

Goldman Sachs is a buyer of Hertz HTZ stock and Hertz 8.5% secured Euro notes as its top cross asset ideas in the $30 bn equipment rental industry and Oshkosh OSK is its top lateral idea. Goldman views 2011 as the year equipment rental fundamentals rebound and believe it is a good time for investors to dig in. Hertz has significant exposure to an equipment rental rebound, however, the stock has lagged pure play peer URI. Given improved visibility on a rental recovery, Goldman raises the 12-month price target on Hertz to $18 from $16. Credit analyst Franklin Jarman notes Hertz's 8.5% secured Euro notes trade at an attractive 6.4% YTM, especially given its low leverage through the capital structure and greater than 80% asset coverage. Goldman reiterates its Buy rating on OSK as it believes: Aerial work platform demand will accelerate earlier in this recovery, driven by compelling supply chain capacity utilization, OSK will deploy its FCF to repay debt through 2012, and see room for multiple expansion with the stock trading at a 5% discount to pure play defense companies and 31% discount to Machinery. Rental company returns on capital are the primary drivers of aerial work platform demand, and with rental industry profits to return to prior mid-cycle levels in 2011, it expects a sharp capex recovery off 2010's trough. HTZ closed Wednesday at $13.90 OSK closed Wednesday at $37.22