Survey: Rental Rates on Decline
June 4, 2008 • In its 62nd Rental Equipment Industry Survey, Switzerland-based UBS Investment Research reports that rental rates are on the downturn as business conditions worsen. The company received more than 120 responses to the survey, with branch managers indicating that year-over-year business conditions deteriorated in April. This marks the fifth consecutive survey in which branch managers have noted year-over-year deterioration in business conditions.
Rental rates continue trend of deterioration, albeit from high levels. Consistent with recent UBS surveys, rental rates continued to deteriorate on a sequential basis. UBS reported that the deterioration in rates is consistent with the year-over-year rental rate changes recently reported by H&E (down 1.8 percent), United Rentals (down 0.6 percent) and RSC Holdings (down 0.4 percent) in their respective first quarters.
Survey results indicated weakness in earthmoving and aerial rental rates. Branch managers indicated rental rate strength in small/light equipment, compaction equipment and “other” equipment, which includes cranes. Conversely, branch managers, in aggregate, noted pricing weakness in earthmoving equipment, aerials, material-handling equipment and trench safety equipment.
UBS maintains its Buy rating on H&E Equipment Services, RSC Holdings and United Rentals, as well as share price targets of $18, $14 and $28, respectively.
