H&E Equipment Services Reports Decreased Revenues, Increased Net Income in Q4 2016
February 27, 2017 - H&E Equipment Services Inc. reported that revenues decreased 10.6% to $244.3 million in the fourth quarter of 2016, versus $273.2 million in Q4 2015. However, net income was $12.4 million in the fourth quarter compared to net income of $12 million a year ago. EBITDA was $78.9 million in the fourth quarter compared to EBITDA of $81.3 million a year ago, yielding a margin of 32.3% of revenues compared to 29.8% a year ago.
John Engquist, H&E Equipment Services’ CEO, noted that 2016 was a solid year for the company and industry, as the strength in the non-residential construction markets continued into the fourth quarter. “Demand for rental equipment was healthy, with both revenues and margins up slightly from a year ago,” he said. “Ongoing weakness in crane demand continued to negatively affect our distribution business, with new and used crane sales down $23 million on a combined basis.”
Engquist added that the company is encouraged by trends and business opportunities in 2017 and beyond. “Customer sentiment was positive prior to the election, but it has improved further post-election, according to many metrics,” he said. “While substantial uncertainty exists regarding the new administration’s proposed infrastructure stimulus plan in terms of total funding, project mix, and timing, a material spend could fuel solid industry growth and extend the cycle for years.
While it is unlikely the industry would benefit from any infrastructure spending until 2018 at the earliest, he said the company believes the new administration’s pro-business position could accelerate construction spending in 2017.
“The energy markets are also improving as shale drillers in the Permian and Eagle Ford Basins are ramping up exploration activity as they expect to generate positive returns at current oil prices,” Engquist added. “For the first time since 2014, we opportunistically moved fleet back into select energy focused markets during the fourth quarter.”
Rental revenues were $115.2 million in the fourth quarter compared to $115.0 million a year ago. New equipment sales decreased 28.5% to $44.9 million in the fourth quarter compared to $62.7 million a year ago. Used equipment sales decreased 29.2% to $24.9 million in the fourth quarter compared to $35.2 million a year ago. Gross margin was 34.6% compared to 33.0% a year ago. Rental gross margins were 47.7% in the fourth quarter of 2016 and 47.5% a year ago.
Average time utilization (based on original equipment cost) was 70.3% compared to 72.0% a year ago. Average time utilization (based on units available for rent) was 67.6% compared to 69.3% last year. Average rental rates decreased 1.1% compared to a year ago.
Dollar utilization was 34.3% in the fourth quarter compared to 35.5% a year ago.
Average rental fleet age at December 31, 2016, was 33 months compared to an industry average age of 43.7 months.
