What Happened?
Shares of equipment rental company Herc Holdings (NYSE:HRI) fell 17.9% in the afternoon session after the company issued a disappointing full-year forecast that overshadowed its second-quarter financial results. While the equipment rental company's revenue grew 18.2% year-over-year to $1.00 billion, it reported a net loss of $35 million. This loss stemmed primarily from $73 million in costs related to its acquisition of H&E Equipment Services and a $49 million asset impairment. The market reacted negatively to the company's updated guidance for the full year, with its revenue projection falling 15% below analyst expectations. The acquisition also increased Herc's debt load and pushed its net leverage ratio to 3.8x, amplifying concerns about the company's financial stability amid the costly integration process.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Herc? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Herc’s shares are extremely volatile and have had 37 moves greater than 5% over the last year. But moves this big are rare even for Herc and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 12.3% on the news that the company reported third-quarter earnings results that blew past analysts' revenue expectations. Notably, the topline outpaced overall industry growth on both a total rental revenue basis and from an organic revenue perspective, which is encouraging. The results were achieved amid tough comps relative to the previous year and a high interest rate environment, which impacted rental revenue. On the other hand, its EPS missed. Overall, we think this was a decent quarter, with some key metrics above expectations.
Herc is down 33.4% since the beginning of the year, and at $123.89 per share, it is trading 48.2% below its 52-week high of $239.28 from November 2024. Investors who bought $1,000 worth of Herc’s shares 5 years ago would now be looking at an investment worth $3,549.
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