H&E Equipment Services (NASDAQ: HEES) reported Q2 EPS of $0.58, $0.13 better than the analyst estimate of $0.45. Revenue for the quarter came in at $310.4 million versus the consensus estimate of $282.26 million.

SECOND QUARTER 2018 SUMMARY1

• Revenues increased 24.5% to $310.4 million versus $249.4 million a year ago. Included in total revenues were $9.8 million from the legacy CEC business (“CEC”) which we acquired on January 1, 2018, and $7.6 million from the legacy Rental Inc. business, which we acquired on April 2, 2018.
• Net income was $20.8 million in the second quarter compared to net income of $9.9 million a year ago. The effective income tax rate was 25.5% in the second quarter of 2018 and 37.0% in the second quarter of 2017.
• Adjusted EBITDA increased 28.7% to $101.8 million in the second quarter compared to $79.1 million a year ago, yielding a margin of 32.8% of revenues compared to 31.7% a year ago. CEC contributed EBITDA of $6.2 million with a margin of 63.5% and Rental Inc. contributed EBITDA of $2.5 million with a margin of 33.1%.
• Rental revenues increased 21.5% to $143.8 million in the second quarter compared to $118.4 million a year ago.
• New equipment sales increased 50.1% to $68.5 million in the second quarter compared to $45.7 million a year ago.
• Used equipment sales increased 33.3% to $32.1 million in the second quarter compared to $24.1 million a year ago.
• Gross margin was 34.8% compared to 35.0% a year ago.
• Rental gross margins were 49.1% in the second quarter of 2018 compared to 47.6% a year ago.
• Average time utilization (based on original equipment cost) was 72.0% compared to 72.2% a year ago. The size of the Company’s rental fleet based on original acquisition cost increased 22.0% from a year ago.
• Average rental rates increased 2.4% compared to a year ago and 0.7% sequentially.
• Dollar utilization was 35.4% in the second quarter compared to 34.9% a year ago.
• Average rental fleet age at June 30, 2018, was 34.2 months compared to an industry average age of 43.6 months.
• Added nine branches this year with the CEC and Rental Inc. acquisitions, as well as one Greenfield in Aledo, Texas, increasing branch count to 89.

John Engquist, H&E Equipment Services’ chief executive officer, said, “Our second quarter performance was strong as both our rental and distribution businesses achieved significant growth from a year ago. Rental revenues increased 21.5% resulting primarily from high utilization on a significantly larger fleet combined with solid increases in rates. New equipment sales increased 50.1% and were primarily driven by new crane sales and earthmoving sales. We are pleased with the growth opportunities in the industry as well as our efforts to capitalize on these opportunities.”

Engquist concluded, “Our outlook for the balance of this year remains positive as demand in our end-user markets is strong and many industry indicators forecast continued growth in non-residential construction. Increasing the size and scale of our business is a strategic priority, which we expect to achieve through organic growth, acquisitions and Greenfield and warm-start branch expansion.”

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