Piper Jaffray, in partnership with RER, last week announced the Rental Sentiment Index in January registered 6.2, consistent with the results of the December survey, and continuing the string of expansionary readings higher than 5.0 since the inception of the survey in October 2013.
“A 6.2 reading signals a modest-to-moderate expansionary rental backdrop, which we view as the optimal growth environment for the equipment rental industry,” said George Tong, research analyst, Piper Jaffray. “Moderate industry growth encourages the ongoing secular penetration of rentals and mitigates against over-investment in the rental fleet.”
The Rental Sentiment Survey, which gauges the outlook of the construction equipment rental industry, polls industry executives for their expectations on rental revenues, rates, volumes, utilization, capital expenditures and the general outlook for the rental industry. The Rental Sentiment Index is standardized on a scale from 1 to 10, with 1 signaling a significant downturn and 10 signaling significant expansion in the current calendar year.
Survey participants indicated expectations for mid-to-high single-digit rental revenue growth in 2014 that will be driven by mid-single digit rental volume growth and low-to-mid single-digit rental rate growth. Industry participants expect 2014 to remain a strong year coming off of a relatively robust 2013. Improving non-residential construction trends were cited as a driver of sustained growth, with healthy contributions from the secular shift from owning to renting.
In January, 44 percent of those surveyed believe the 2014 outlook for equipment rentals is slightly improved or significantly improved compared to last month.
“My outlook remains positive on the rental industry,” one respondent said. “The shift from ownership to rental drives much of the growth in the industry, especially in the earthmoving sector. Time utilization remains strong and the environment for continued rate increases remains positive.”
“Certain segments of our business are very strong such as temporary roads,” another respondent noted. “This is a result of demand created by large pipeline and transmission/distribution projects. Excavation shoring is picking up based on an uptick in construction activity.”
The Rental Sentiment Index is quantitatively derived by normalizing multiple choice responses from the survey to be on a 10-point scale, aggregating the normalized responses based on predetermined weights for each survey question and weighting responses by participants based on the size of their rental operations. The Rental Sentiment Index is designed to provide a quick summary of each month’s survey results and easily tracks changes in the industry outlook over time.
The survey population consists of executives and senior managers in the construction equipment rental industry covering every region of North America representing more than $13 billion in annual revenues. December results are based on a sample size of 106 respondents. Thirty percent of survey respondents indicated their company has more than $10 million in annual revenue.
Piper Jaffray is an investment bank and asset management firm, serving the needs of corporations, private equity groups, public entities, non-profit entities and institutional investors since 1895. It is headquartered in Minneapolis.
RER has covered the equipment rental industry since 1957, providing its readers with a mix of news, features and product information. For more information, visit www.rermag.com.