Why Herc Holdings Rocketed Over 20% Today
Key Points
Herc delivered a beat-and-raise third quarter, with profits up over 76%.
The company is delivering on the synergies promised in the H&E Equipment acquisition, allaying fears over its high debt load.
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Shares of construction equipment rental company Herc Holdings (NYSE:HRI) rocketed 23.4% today as of 2:21 p.m. EDT.
Herc rallied on an exceptionally strong earnings report published this morning, with a beat on both the top and bottom lines, and an increase to full-year guidance.
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Herc had been trading at a fairly low valuation relative to equipment rental peers, amid concerns about its high debt stemming from last year's acquisition of H&E Equipment Services. However, those fears were allayed by the company's resilient growth and fleet utilization last quarter.
Herc outperforms in a mixed backdrop
In the third quarter, Herc saw total revenue rise by 4.6% to $1.36 billion; however, the company's bottom line showed much stronger growth, with adjusted (non-GAAP) earnings per share up a whopping 76.1% to $3.91. Both figures handily beat expectations.
The massive increase in profitability was due to a 12% increase in equipment rental revenue and a 3.6 percentage-point increase in overall utilization. The improved efficiency was due to the company's successful integration of H&E, which closed in June of 2025.
While local residential and non-residential construction has been sluggish, Herc has apparently landed enough "mega-projects" in areas like data centers and oil and gas to continue growing.
While higher interest rates can be a headwind for construction, higher borrowing costs may also lead more construction entities to lease equipment from companies like Herc rather than buy it outright. That may be playing a role here as well.
Today's solid and improving results led to a big move in the stock because Herc came into the day trading at a steep discount to other large equipment rental companies, such as United Rentals (NYSE:URI) and Sunbelt Rentals (NYSE:SUNB). This was due to concerns over Herc's debt load resulting from the H&E acquisition. However, today's results appeared to indicate the realization of both cost and revenue synergies, resulting in higher-than-expected profitability.
Image source: Getty Images.
Herc is a cheap way to play industrial growth
After today's leap, Herc stock trades at roughly 21.5 times 2026 adjusted earnings estimates and about 14.4 times 2027 earnings estimates. That's a very reasonable price to pay for the stock, as long as the company can continue to find projects to utilize its expanded fleet. Data center growth appears set to continue through next year, and if the housing slump ever recovers, that would be another tailwind for this well-executing industrial stock.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends Herc. The Motley Fool has a disclosure policy.
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