Equipment rental company Herc Holdings (NYSE:HRI) announced better-than-expected revenue in Q2 CY2025, with sales up 18.2% year on year to $1.00 billion. On the other hand, the company’s full-year revenue guidance of $3.8 billion at the midpoint came in 15% below analysts’ estimates. Its non-GAAP profit of $1.87 per share was 6.2% above analysts’ consensus estimates.
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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 $1.76 (6.2% beat)
- Adjusted EBITDA: $406 million vs analyst estimates of $408.3 million (40.5% margin, 0.6% miss)
- The company provided revenue guidance for the full year of $3.8 billion at the midpoint
- EBITDA guidance for the full year is $1.85 billion at the midpoint, below analyst estimates of $1.93 billion
- Operating Margin: 20.5%, up from 18.4% in the same quarter last year
- Free Cash Flow was -$58 million, down from $56 million in the same quarter last year
- Market Capitalization: $4.27 billion
“The second quarter marked an important milestone for our company. On June 2nd, we completed the transaction to bring Herc Rentals and H&E Equipment Services together. This acquisition, the largest in the industry, will accelerate our strategy to deliver market leading growth and superior value creation by providing geographic and customer diversification, a substantially expanded footprint in key regions with economies of scale, and a larger fleet to strengthen our position as a premier rental company in North America,” said Larry Silber, president and chief executive officer.
Company Overview
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE:HRI) provides equipment rental and related services to a wide range of industries.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Herc’s sales grew at an incredible 15.3% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Herc’s annualized revenue growth of 10.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
We can better understand the company’s revenue dynamics by analyzing its most important segment, Equipment rentals. Over the last two years, Herc’s Equipment rentals revenue (aerial, earthmoving, material handling) averaged 9.3% year-on-year growth.
This quarter, Herc reported year-on-year revenue growth of 18.2%, and its $1.00 billion of revenue exceeded Wall Street’s estimates by 6.9%.
Looking ahead, sell-side analysts expect revenue to grow 22% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will fuel better top-line performance.
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Operating Margin
Herc has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Herc’s operating margin rose by 3.7 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q2, Herc generated an operating margin profit margin of 20.5%, up 2.1 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Herc’s EPS grew at an astounding 29.1% compounded annual growth rate over the last five years, higher than its 15.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of Herc’s earnings can give us a better understanding of its performance. As we mentioned earlier, Herc’s operating margin expanded by 3.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Herc, its two-year annual EPS declines of 3.4% mark a reversal from its (seemingly) healthy five-year trend. We hope Herc can return to earnings growth in the future.
In Q2, Herc reported EPS at $1.87, down from $2.60 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 6.2%. Over the next 12 months, Wall Street expects Herc’s full-year EPS of $11.10 to stay about the same.
Key Takeaways from Herc’s Q2 Results
We were impressed by how significantly Herc blew past analysts’ revenue expectations this quarter. We were also glad its Equipment rentals revenue topped Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this quarter was mixed. The stock remained flat at $150.70 immediately after reporting.
Is Herc an attractive investment opportunity at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.