JPMorgan Starts Herc Holding (HRI) at Neutral

JPMorgan analyst Tami Zakaria initiates coverage on Herc Holding (NYSE: HRI) with a Neutral rating and a price target of $155.00.

The analyst comments: "HRI is the 3rd largest equipment rental company in North America with rental revenue market share of ~4% as of FY23, only behind URI's ~16% and AHT's (Sunbelt Rentals) ~11%. Management targets to grow the company's rental revenue at 2.5-3.5x the industry growth rate of ~4% expected over 2024-2026E (which was ARA's estimate at the time when HRI announced these targets), driven by investments in greenfield locations and technology platforms. The expansion of locations in the top 100 metropolitan areas and the investment in rental fleet should offer greater scale, which would improve utilization of the fleet, increase cross-selling to existing and new clients, strengthen bargaining power with vendors, and raise cost absorption, driving margin improvement over time. Mega projects tied to US infrastructure development are expected to be a key growth enabler as management sized the opportunity at ~$300MM of annual rental revenue tailwind (>10% as a percentage of FY23 rental revenues excluding Cinelease) over the next several years. Management estimates ~$350B of project starts with budget over $250MM (defined as mega projects) in 2024, funded by IIJA/IRA/CHIPS and private spending in supply chain relocation and electrification. Within a typical mega project, ~2% of the spend is the rental revenue opportunity, which points to ~$2.3B of industry rental revenue opportunity per year assuming a 3-year project life on average. Assuming 10-15% market share opportunity for HRI, this translates to ~$300MM of annualized rental revenue opportunity from these mega project starts in 2024."

For an analyst ratings summary and ratings history on Herc Holding click here. For more ratings news on Herc Holding click here.

Shares of Herc Holding closed at $134.28 yesterday.

You May Also Be Interested In

• Goldman Sachs Upgrades Plains GP Holdings, L.P (PAGP) to Neutral
• UBS Double Upgrades China Resources Power Holdings (836:HK) (CRPJY) to Buy
• BorgWarner (BWA) PT Raised to $95 at Wolfe Research, 'Bullish Takeaways from CEO Meetings'