Herc's third quarter saw a positive market response as the company reported strong revenue growth, driven by its largest industry acquisition and robust activity in mega projects and specialty equipment solutions. Management attributed the quarter’s momentum to rapid integration execution, with CEO Lawrence Silber highlighting the completion of a complex systems migration in just 90 days. The company’s focus on fleet optimization and expanded specialty offerings contributed to operational resilience amid a mixed demand environment, particularly as local markets were affected by high interest rates.
Is now the time to buy HRI? Find out in our full research report (it’s free for active Edge members).
Herc (HRI) Q3 CY2025 Highlights:
- Revenue: $1.30 billion vs analyst estimates of $1.29 billion (35.1% year-on-year growth, 0.9% beat)
- Adjusted EPS: $2.22 vs analyst expectations of $2.31 (4.1% miss)
- Adjusted EBITDA: $551 million vs analyst estimates of $541.9 million (42.3% margin, 1.7% beat)
- The company reconfirmed its 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 $1.87 billion
- Operating Margin: 13.1%, down from 23.7% in the same quarter last year
- Market Capitalization: $4.54 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Herc’s Q3 Earnings Call
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Mircea Dobre (Baird) asked about the timeline for fleet rightsizing and its impact on operations. COO Aaron Birnbaum indicated most heavy lifting was done in Q3, with further progress expected in Q4 and normalization in 2026, while CFO Mark Humphrey quantified remaining disposals.
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Tami Zakaria (JPMorgan) inquired whether general rental branch consolidations would significantly reduce locations. Birnbaum clarified consolidations are limited and focus on converting branches to specialty use, not widespread closures, preserving market presence.
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Kyle Menges (Citi Group) probed for early findings from efficiency reviews following platform integration. Humphrey stated that efficiency reviews are ongoing, with initial efforts focused on aligning operational KPIs and territory expectations, and further improvements anticipated as integration progresses.
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Kenneth Newman (KeyBanc Capital Markets) asked about margin trends and how to model gross margin and SG&A costs post-integration. Humphrey explained Q3 contained mapping noise and forecasted a modest efficiency dip in Q4 due to seasonal revenue declines, but no major deviations from recent cost structures.
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Robert Wertheimer (Melius Research) questioned customer attrition post-acquisition and rental rate convergence. CEO Silber and Birnbaum confirmed attrition had stabilized, with ongoing efforts to align pricing and improve service levels for acquired customers, expecting gradual rate improvement.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) the pace and impact of specialty location expansion and cross-selling, (2) progress on cost and revenue synergy realization from the integration, and (3) signs of local market recovery as interest rates and macroeconomic conditions evolve. Additionally, we will watch how fleet optimization and training investments influence operational efficiency and margin trends.
Herc currently trades at $136.35, up from $133.32 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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