HERC HOLDINGS INC (NYSE:HRI) Reports Mixed Q3 Results with Revenue Beat and Guidance Miss

HERC HOLDINGS INC (NYSE:HRI) reported third-quarter financial results that presented a mixed picture for investors, beating revenue expectations but falling short on profitability metrics while issuing full-year guidance that came in below analyst forecasts. The equipment rental company's performance reflects the ongoing challenges and opportunities presented by its recent acquisition of H&E Equipment Services.

Quarterly Performance Versus Estimates

The company posted strong top-line growth for the quarter ended September 30, 2025, with total revenues increasing 35% year-over-year to $1.30 billion. This figure slightly exceeded Wall Street's consensus estimate of $1.31 billion, representing a narrow beat of approximately 0.3%. The revenue growth was primarily driven by a 30% increase in equipment rental revenue, which reached $1.12 billion, demonstrating the company's core operational strength.

However, the bottom-line results told a different story. Herc reported adjusted earnings per share of $2.22, coming in 4.1% below the analyst consensus estimate of $2.32. This earnings miss occurred despite a 24% increase in adjusted EBITDA to $551 million, though the adjusted EBITDA margin contracted to 42.3% from 46.2% in the prior-year period.

Key financial metrics from the quarter include:

• Total revenues: $1.30 billion (beat estimates by 0.3%)
• Adjusted EPS: $2.22 (missed estimates by 4.1%)
• Equipment rental revenue: $1.12 billion, up 30% year-over-year
• Adjusted EBITDA: $551 million, up 24% year-over-year
• Net income: $30 million, down significantly from $122 million in Q3 2024

Market Reaction and Guidance Concerns

The market reaction to these results has been notably negative, with the stock declining in pre-market trading following the earnings release. This reaction appears to be driven primarily by the company's full-year revenue guidance, which at $3.8 billion at the midpoint comes in 14.2% below analysts' estimates of $4.43 billion. The guidance disappointment likely overshadowed the modest quarterly revenue beat and has raised questions about the company's near-term growth trajectory.

The negative sentiment is particularly noteworthy given the stock's recent performance, which had shown strength in the weeks leading up to the earnings report with gains of approximately 17% over the past month. The pre-market decline suggests investors are reassessing their expectations in light of the conservative forward guidance.

Strategic Developments and Operational Highlights

Beyond the headline numbers, Herc's quarterly results highlighted several important strategic developments. The company completed the full IT integration of its H&E Equipment Services acquisition, successfully migrating all acquired branches onto Herc's systems within what management described as a "best-in-class timeline." This integration milestone represents a crucial step in realizing the strategic benefits of the acquisition.

Operational metrics showed the impact of the acquisition, with the company's total fleet reaching approximately $9.6 billion at original equipment cost, a 38% increase in average fleet compared to the prior-year period. However, this expansion came with some operational challenges:

• Dollar utilization declined to 39.9% from 42.2% in the prior-year period, primarily due to lower utilization of the acquired fleet
• Direct operating expenses increased to 41.6% of equipment rental revenue from 38.6%
• Interest expense nearly doubled to $134 million due to new debt facilities issued to fund the H&E acquisition

The company also completed the divestiture of its Cinelease studio entertainment business on July 31, 2025, for initial cash consideration of $100 million, using the proceeds to repay a portion of its credit facility.

Financial Position and Capital Management

Herc maintained a disciplined approach to capital management during the quarter, with net rental equipment capital expenditures of $529 million for the first nine months of 2025. The company's net leverage increased to 3.8x from 2.7x in the same period last year, reflecting the debt taken on to fund the H&E acquisition, while liquidity remained strong at approximately $1.8 billion including cash and unused credit facilities.

Outlook and Analyst Expectations

Looking ahead, Herc reaffirmed its full-year 2025 guidance, projecting equipment rental revenue between $3.7 billion and $3.9 billion and adjusted EBITDA between $1.8 billion and $1.9 billion. This guidance, particularly on the revenue side, falls meaningfully below current analyst expectations, creating a significant overhang for the stock despite the company's solid quarterly execution.

For investors seeking more detailed analysis of future earnings potential and analyst estimates, additional information is available through the company's earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or recommendation to buy or sell any security. Investors should conduct their own research and consult with financial advisors before making investment decisions.