Herc Holdings Targets Higher Earnings From Rentals, Explores Sale Of Studio Entertainment Business

Herc Holdings Inc HRI reported fourth-quarter FY23 sales growth of 6% year-on-year to $831 million, missing the analyst consensus of $860.35 million.

Adjusted EPS of $3.24 missed the analyst consensus of $3.47.

Equipment rental revenue increased 4.9% Y/Y to $748 million.

Adjusted EBITDA of $382 million increased by 6% in the quarter under review with an adjusted EBITDA margin at 46.0%

Rental pricing increased 5.8% year-over-year. As of Dec. 31, 2023, the company’s total fleet was approximately $6.3 billion at OEC. The average fleet at OEC in the fourth quarter increased 14% compared to the prior-year period and increased 21% year-to-date. 

The average fleet age was 45 months as of Dec. 31, 2023, compared to 48 months in the comparable prior-year period.

The Bonita Springs, Florida-based company said it is also exploring strategic alternatives for its Cinelease studio entertainment business, an equipment rental company.

Herc first partnered with Cinelease in 2012, and acquired it in 2019. Since then, it has grown the business with bolt-on acquisitions. In 2021, it purchased Dwight Crane Ltd. and its U.S. affiliate, LRX LLC, for an undisclosed price.

Herc CEO Larry Silber said, “For 2024, we expect to deliver 7-10% organic rental-revenue growth and 6-9% higher adjusted EBITDA year over year, outpacing industry growth forecasts and driving incremental margin expansion as we enhance asset efficiency for greater operating leverage and roll out our new E3 Operating System.”

Outlook: Herc projects 2024 organic rental-revenue growth of 7% – 10% and 6 – 9% higher adjusted EBITDA year over year.

It expects 2024 adjusted EBITDA of $1.55 billion – $1.60 billion versus 2023’s $1.45 billion.

Price Action: HRI shares closed higher by 2.00% at $154.68 on Monday.