H&E Equipment Services last week posted a record 15.1 percent second-quarter revenue increase to $233.1 million, compared to $202.5 million in last year’s second quarter. EBITDA increased 2.5 percent to $57.6 million compared to $56.2 million for the year-ago period.
Net income decreased 23.2 percent year over year from $19.8 million a year ago to $15.2 million this year, and income from operations dropped from $35 million in Q206 to $32.9 million this year, while total gross margins dropped to 30.5 percent compared with 33.7 percent in last year’s second quarter.
Equipment rental revenues for the quarter jumped 8.7 percent from $64 million in last year’s period to $69.6 million. At the end of the second quarter of 2007, the original acquisition cost of the rental fleet was $678.1 million, compared to $614.3 million at the end of last year’s Q2. Dollar utilization was 41.5 percent, compared to 42.2 percent in the same period last year.
“Demand for new equipment, especially cranes, was extremely strong, which had a negative effect on our consolidated margins as this component of our business generates lower margins than our other segments,” said president and CEO John Engquist. “This shift in revenue mix, combined with record year-over-year comps, impacted our bottom line performance for the quarter as compared to a year ago. Our returns were negatively impacted by softness in time utilization early in the quarter, partly due to the completion of hurricane-related work in Florida. Our time utilization returned to normal levels in the second half of the quarter due to strong demand in our other markets.
“We are also seeing increased spending in Coastal Louisiana as a result of Hurricane Katrina and expect this spending to accelerate in the third and fourth quarters. We remain encouraged about the trends in the non-residential construction markets we serve and our outlook for both the near and long term.”
Engquist said the company is raising its top-line estimates for the year. “Non-residential construction activity remains strong across our footprint,” he said. “We are very encouraged by the activity we see in the major industries we serve including the petrochemical sector, energy sector and mining industry. The demand for new equipment, particularly cranes, is extremely strong and gives us confidence in the non-residential construction cycle. Although we see many positives for our business as a result of the strong demand for new equipment, we expect our earnings will be negatively impacted by the change in revenue mix. We have revised our earnings to reflect increased depreciation expense as a result of de-aging our fleet.”
H&E is now expecting 2007 earnings per share of $1.59 to $1.67, down from previous expectations in the range of $1.63 to $1.85. It raised its revenue guidance to the $935 to $953 million range from $900 to $920 million, but lowered EBITDA expectations to $233 to $240 million from $232 to $245 million.
H&E management said it lowered the average fleet age of its Eagle High Reach Equipment division from 60 months to 37 to 38 months as a result of strong demand for aerial equipment of six years old or older in the Asian markets.
Based in Baton Rouge, La., H&E Equipment Services is No. 9 on the RER 100.