Rental Companies' Shares Surge

April 11, 2007 • Strong equipment demands in non-residential construction and the Gulf Coast and a possible company sale caused shares for rental companies H&E Equipment Services and United Rentals to surge this week.

 

Forbes.com reported a rush for H&E's shares on Monday after expectations that its results would be boosted by a strong demand for its cranes and presence in the Gulf Coast. Despite sliding to a 12-month low of $20.27 on April 4, H&E shares were up 7 percent to $22.45 on the Nasdaq Stock Market Monday after peaking at $23.27 earlier that day.

 

“We expect H&E to recover from recent lows on evidence of continued strength of its non-residential construction markets,” said Bank of America's Seth R. Weber. He boosted his rating of H&E from “Neutral” to “Buy.”

According to Weber, H&E's crane segment accounts for an estimated 30 percent of its revenue, while at the same time, the company's Gulf Coast presence provides possible additional opportunities for petrochemical, oil patch, and hurricane reconstruction activity.

Forbes.com also noted that shares of United Rentals surged early on Tuesday after the equipment rental company said it is exploring a possible sale of itself. Shares rose $4.90, or 17.8 percent, to $32.45 on the New York Stock Exchange.

CIBC World Markets Corp. analyst Scott A. Schneeberger reiterated a “Sector Outperformer” rating on the stock in a client note, writing that United Rentals could potentially fetch a premium to recent deals in the industry, because it is the largest domestic company in its sector. He has a $33 target price on shares.

“Potential acquirers could range from financial buyers to industrial conglomerates to equipment manufacturers to direct peers,” Schneeberger wrote. Additionally, he said United Rentals is benefiting from a trend toward renting construction equipment over buying.