McGrath RentCorp Q2 EPS Jumps 74 Percent

Key Points

• - Earnings per share (GAAP) reached $1.46 for Q2 2025, beating GAAP expectations of $1.22 and rising 73.8% year over year.

• - Revenue (GAAP) climbed to $235.6 million for Q2 2025, outpacing the $220.71 million GAAP estimate and increasing 11% from the prior year.

• - Margins narrowed due to cost and utilization pressures, while the dividend rose and full-year 2025 guidance improved with updated expectations for total revenue of $925 to $960 million and adjusted EBITDA of $347 to $356 million.

• These 10 stocks could mint the next wave of millionaires ›

McGrath RentCorp (NASDAQ:MGRC), a leading provider of modular buildings, portable storage, and electronic test equipment rentals, delivered strong results in its second–quarter 2025 earnings released on July 24, 2025. The company posted better–than–expected GAAP earnings per share and revenue, with EPS (GAAP) of $1.46 compared to analysts’ $1.22 forecast and GAAP revenue of $235.6 million versus a $220.71 million estimate. While profits and sales outpaced expectations, the company faced some cost and margin pressures during the period. Management described the quarter as a period of solid operational execution and management modestly raised the lower end of its full-year 2025 adjusted EBITDA guidance, highlighting increased confidence while maintaining a cautious outlook on market conditions.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Success Factors

McGrath RentCorp operates a diversified rental portfolio spanning four main segments: Mobile Modular (modular building rentals), Portable Storage (storage container rentals), TRS-RenTelco (electronic test equipment rental), and Enviroplex (modular building sales). This range allows the company to serve different sectors, from education and construction to technology.

The company’s focus has been on maintaining strong cash flow, quick investment recovery, and prudent capital allocation. Managing high utilization rates and delivering excellent customer experience are crucial for success. The company’s recent cash inflow from the termination of a merger agreement resulted in net proceeds of $116.8 million during the year ended December 31, 2024. Key factors for ongoing performance include diverse revenue streams, effective fleet management, and the ability to grow market share in competitive rental and service markets.

Quarterly Highlights: Segment Performance and Trends

In the period, McGrath RentCorp exceeded GAAP revenue and earnings expectations. Top-line growth in the Mobile Modular and TRS-RenTelco segments offset headwinds in Portable Storage. The Mobile Modular segment, which rents modular buildings used in commercial and education settings, reported rental revenue of $81.9 million (up 5% year over year) (GAAP) and rental-related services revenue of $32.2 million (up 11%). Sales revenue for Mobile Modular rose 13%, but the gross margin on sales narrowed to 32%, compared to 38% a year earlier (Q2 2025 versus Q2 2024). The company attributed this margin decline to a higher mix of new versus used sales. Selling and administrative costs saw a notable increase, mainly due to higher labor spend. Fleet utilization for Mobile Modular dropped from 78.4% in Q2 2024 to 73.7% in Q2 2025.

The Portable Storage segment, which supplies rental storage containers, continued to experience weak demand due to lower commercial project activity. Rental revenue for Portable Storage fell by 5% compared to Q2 2024, and rental-related services revenue decreased from $4.6 million to $4.4 million over the same period. Utilization dropped to 61.1% from 66.1% in Q2 2024. Sales revenue for Portable Storage increased 28% to $69.8 million compared to Q2 2024, but gross profit on rental revenues for Portable Storage declined 9% to $14.0 million compared to Q2 2024. The company noted it has no urgent need to liquidate storage assets, as the average container has a long useful life.

TRS-RenTelco, which rents out electronic test equipment to customers in sectors like semiconductors and communications, showed robust performance. Rental revenue for TRS-RenTelco grew 7% to $27.1 million compared to Q2 2024, and sales rose 32% to $7.7 million. Gross profit on rental operations improved by 32%, and utilization for TRS-RenTelco increased from 56.5% in Q2 2024 to 64.8% in Q2 2025, reflecting broad-based demand and improved project starts. The gross margin on sales for this unit contracted to 47% in Q2 2025 from the prior year’s 54% in Q2 2024.

The company continued to emphasize asset management, focusing on refurbishing rather than heavily investing in new fleet additions during a period of flat to declining utilization in the first half of 2025. Capital expenditures for rental equipment in the first half of 2025 totaled $50.2 million, with full-year 2025 guidance unchanged at $115–$125 million. Operating cash flow (GAAP) for the first six months of 2025 was $109.7 million, down from $138.6 million for the first six months of 2024, but remained strong enough to enable ongoing investment and dividend growth. The mutual termination of the company’s prior merger agreement resulted in net proceeds of $116.8 million during the year ended December 31, 2024, which strengthened the balance sheet and kept leverage below 1.6 times adjusted EBITDA as of Q1 2025.

On the dividend front, McGrath RentCorp declared a quarterly dividend of $0.485 per share, up from $0.475 in Q2 2024. This marks a steady trend of annual dividend increases and results in a 1.7% yield as of the July 23, 2025 closing share price of $115.05. There were no sudden or unusual changes to the payout policy.

Looking Ahead: Guidance and Investor Considerations

Management modestly raised its lower end of full-year 2025 guidance for both revenue and adjusted EBITDA. Total revenue is now expected to fall between $925 million and $960 million, compared to the prior range of $920 million to $960 million. Capital expenditure plans for rental equipment remain unchanged from prior projections.

In its commentary, even so, it highlighted ongoing caution due to persistent uncertainties in commercial construction and the risk of further softness in utilization rates. Observers are likely to focus closely on margin development, trends in asset utilization, and demand signals in the construction and education markets as potential indicators of future company performance. The company’s guidance bands remain wide.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,037%* — a market-crushing outperformance compared to 182% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of July 21, 2025

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends McGrath RentCorp. The Motley Fool has a disclosure policy.