Herc NYSE: HRI reported third-quarter 2026 equipment rental revenue growth of approximately 12%, supported by mega-project activity, specialty equipment demand and improved fleet efficiency, while raising its full-year earnings outlook.
The company said the quarter marked its first full period of comparable year-over-year combined results following its acquisition of H&E Equipment Services. CEO Larry Silber said the H&E integration was completed nine months after the transaction closed and has expanded Herc’s sales force, fleet availability and ability to serve large projects.
Silber also announced that he will transition from CEO to executive chairman on Jan. 1. President Aaron Birnbaum, who has been with the company for more than 35 years and has held leadership roles in operations, sales and field management, will become CEO.
Fleet efficiency and specialty growth
Equipment rental revenue increased nearly 12% despite average original equipment cost, or OEC, fleet growth of less than 2%, according to the company. Herc said dollar utilization improved by 360 basis points during the quarter as it tightly managed fleet assets, aligned equipment with markets and improved deployment.
Specialty revenue rose by double digits year over year. Specialty equipment represented 20% of total fleet at OEC at quarter-end, returning to the company’s pre-acquisition mix after falling to 17% following the H&E acquisition, which had a greater concentration of general rental equipment.
Birnbaum said the company is directing investment toward specialty equipment and mega-project requirements while managing general rental capacity in stable local markets. Herc added about $580 million of fleet at OEC during the third quarter and approximately $1.2 billion year to date. It disposed of about $200 million of fleet during the quarter, compared with $375 million in the prior-year period, when it was rightsizing acquired equipment.
The company cited continued national-account demand from data centers, infrastructure, manufacturing and energy projects. Local markets remained stable overall, with infrastructure, government and maintenance-related work offsetting softer interest-rate-sensitive commercial construction activity.
Herc said it is targeting a 20% share of the mega-project rental opportunity over time, based only on projects where it is the designated primary or secondary supplier. Birnbaum said reaching that target will take multiple years and is not expected to occur in 2027.
Margins, cash flow and balance sheet
Total revenue increased approximately 5% in the third quarter, trailing rental revenue growth because equipment sales declined following elevated fleet dispositions in the prior year. Adjusted REBITDA rose about 9%, while adjusted REBITDA margin expanded 190 basis points to 44.2%.
REBITDA, which excludes equipment sales, increased about 10%, though its margin declined 70 basis points to 45.2%. CFO Mark Humphrey said rental volume, pricing improvements and H&E-related revenue and cost synergies supported the rental business, but those factors were more than offset by operating cost inflation, higher field incentive compensation and fuel and freight costs.
Fuel and freight pressures, including an ancillary revenue mix effect, reduced year-over-year REBITDA margin by approximately 100 basis points, improving from a 170-basis-point impact in the second quarter. Humphrey said the company had improved recovery of higher refueling costs, while sales and service vehicles and inter-branch equipment transfers continued to face fuel-related pressure.
Adjusted net income totaled $131 million, or $3.91 per diluted share. Through the first nine months of 2026, Herc generated $133 million of free cash flow. The company ended the quarter with $2.1 billion of liquidity and net leverage of 3.9 times, down from 3.95 times at the end of June. It also paid its regular quarterly dividend of $0.70 per share.
Raised outlook and planned fleet investment
Herc raised its full-year outlook, citing an expanding portfolio of mega projects. At the midpoint of its updated guidance, the company expects 2026 equipment rental revenue of $4.513 billion and adjusted REBITDA of $2.13 billion, each about 2% above its prior guidance midpoint.
The company increased midpoint net fleet capital expenditures to approximately $1.05 billion, primarily reflecting higher purchases of specialty equipment for newly won or expanded mega-project assignments scheduled to begin in the fourth quarter. Humphrey said the roughly $150 million of incremental net fleet CapEx is effectively being pulled forward from the 2027 budget and is tied to identified customer requirements rather than a broad market recovery assumption.
- Second-half equipment rental revenue growth is expected to be approximately 14% at the midpoint, on average OEC fleet growth of approximately 4%.
- Full-year pro forma rental revenue growth is expected to be about 8% on roughly 2% average OEC fleet growth.
- Full-year free cash flow guidance remained unchanged at $250 million to $350 million.
Humphrey said the new fleet is expected to go on rent immediately and contribute to fourth-quarter REBITDA, with the greater benefit arriving in 2027 and beyond. The company remains focused on reducing leverage to the top end of its targeted range by the end of 2027.
On pricing, Humphrey said rental rates performed in line with expectations during the third quarter but had not fully offset inflation, particularly fuel and freight costs. Birnbaum described the pricing environment as rational and constructive, while noting that the extent of further improvement will depend on the recovery in spot-market activity.
About Herc (NYSE:HRI)
Herc Holdings Inc, operating primarily through the Herc Rentals brand, is an equipment rental supplier serving construction, industrial, commercial and government customers. The company provides access to equipment and related services intended to help customers complete projects without purchasing and maintaining their own fleets.
Its rental fleet includes aerial work platforms, earthmoving equipment, material-handling equipment, trucks and trailers, power generation and climate-control equipment, pumps, and general tools.
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