Rental Revenues are Up – and Top Execs Predict Continued Growth

Rental revenues are up – and top industry executives see continued growth on the horizon as contractors increasingly tap rental to meet their equipment needs for infrastructure construction, data centers and other mega projects.

The top three construction equipment rental companies in the United States — United Rentals, Ashtead Group and Herc Rentals — all saw rental revenue growth in their latest earnings reports. Used-equipment sales revenues were mixed as prices continued to normalize from their Covid peaks.

The American Rental Association confirmed the continuation of growth in its latest forecast, calling for an 8.9% increase in construction and general tool rental revenue in 2024, totaling $78.7 billion. 

Drops in inflation and interest rates could be another boon for the rental industry, as projects previously put on hold move into production.  

United Rentals

United Rentals total Q2 rental revenue rose 7.8% year-over-year to $3.215 billion, compared to $2.981 billion during the same period last year. Total revenue for the quarter ended June 30, 2024, including rental revenue, rose to $3.773 billion, a 6.2% hike.

In addition, fleet productivity — a measurement of the combined impact of changes in rental rates, time utilization and mix on owned equipment rental revenue — increased 4.6% year-over-year, including the impact of the Yak acquisition, and increased 3% excluding the impact of the Yak acquisition, while average original equipment at cost increased 2.7%.

Used equipment sales in the quarter decreased 4.5% year-over-year, generating $365 million of proceeds at a GAAP gross margin of 47.4% and an adjusted gross margin of 51.8%. The company says the declines are due to the normalization of the used equipment market, including pricing.

General rentals segment rental revenue increased 0.9% year-over-year to a second quarter record of $2.209 billion, while rental gross margin increased to 36.3%.

Specialty rentals, or trench, power and fluid solutions, revenue hit $1.006 billion, a 27% jump year-over-year including the impact of the Yak acquisition, and an 18.1% increase excluding the Yak acquisition.

“We were pleased with our record second-quarter results across revenue, adjusted EBITDA and EPS, as 2024 continues to play out as we expected. The integration of Yak remains on track. This acquisition builds upon our one-stop shop strategy of providing customers a best-in-class rental experience through our general rentals and specialty offerings, Matthew Flannery, chief executive officer of United Rentals, said.

“As we enter the second half of 2024, we are confident that our consistent execution will enable us to deliver on our updated guidance, with the mid-point for both revenue and adjusted EBITDA reaffirmed, and our expectations for capex and free cash flow unchanged. We continue to see particular strength in large projects, and believe we are uniquely positioned to capitalize on these opportunities in addition to other long-term avenues of growth,” he continued.

Ashtead Group/Sunbelt Rentals

Ashtead Group, the parent company of Sunbelt Rentals, reported $2.628 billion in total revenue for the fourth quarter of its 2024 fiscal year, which ended on April 30. This was a 7.5% increase over the same period in 2023. Rental revenue grew to $2.313 billion, an 8.8% increase year over year.

Group revenue hit $10.859 billion during the year, a 12% jump from fiscal year 2023. U.S. operations saw rental-only revenue rise to $6.558 billion, compared to $5.879 billion the prior year, a 12% increase. The general tool business also grew by 11%, and the specialty business grew by 14% during the year.

US total revenue, including new and used equipment, merchandise and consumable sales, increased 13% to $9.307 billion, driven by a higher level of used equipment sales. “We took advantage of improved fleet deliveries and strong second-hand markets to catch up on delayed disposals and bring forward some disposals scheduled for early 2024/25,” the company said in a statement.

Sunbelt added 113 new locations in North America during its 2024 fiscal year.

Ashtead’s chief executive, Brendan Horgan, said, “The Group’s operating performance continues to be strong with record revenue and operating profit, up 12% and 5% respectively, both at constant currency. After a higher interest expense, reflecting the interest rate environment and increased average debt levels, adjusted profit before taxation was slightly lower than last year at $2.230 billion.

We completed Sunbelt 3.0 in April, executing well against all actionable components of that plan and developing a strong foundation for the next phase of our growth. During the year, we invested $4.3 billion in capital across existing locations and greenfields and $905 million on 26 bolt-on acquisitions, adding a combined 113 locations in North America. This investment is enabling us to take advantage of the substantial structural growth opportunities that we see for the business, while maintaining a strong and flexible balance sheet.

Our end markets in North America remain robust with healthy demand, supported in the U.S. by the increasing proportion of mega projects and the ongoing impact of the legislative acts. We are in a position of strength, with the operational flexibility and financial capacity to capitalize on the opportunities arising from these market conditions and ongoing structural changes. Through the actionable components of our new strategic growth plan, Sunbelt 4.0, we will drive long-term sustainable growth and returns for all stakeholders and the Board looks to the future with confidence.”

Q1 2025 earnings will be reported on September 3.

Herc Rentals

Herc Rentals saw record equipment rental revenue of $765 million in the second quarter ended June 30, 2024, an increase of 9%.

Total revenues increased 6% to $848 million, compared to $802 million during the same period last year. Herc attributes the year-over-year increase to additional equipment rental revenue, reflecting positive pricing and increased volume, partially offset by unfavorable mix driven primarily by inflation. Sales of rental equipment decreased by $18 million during the period.

Total revenues for the first half of the year increased 7% to $1.652 billion compared to $1.542 billion in the prior-year period. Additional equipment rental revenues again drove the increase for the first half of the year overall. Sales of rental equipment decreased by $20 million during the period.

As of June 30, 2024, Herc’s total fleet was approximately $6.7 billion at the original equipment cost. The average fleet age was 47 months, compared to 46 months during the same period last year.

Larry Silber, president and chief executive officer of Herc Rentals, commented, “In the second quarter, we benefited from positive rental pricing, increasing fleet efficiency, and expanding market share, as we continue to significantly outpace rental-industry growth. Overall, our record second quarter revenue results came in according to our expectations. However, while national mega projects are on plan, we saw a greater deceleration in the local market's growth trajectory versus our forecast, primarily driven by the persistently higher interest-rate environment. The local-revenue deficit was essentially offset by contributions from acquisitions that added 21 locations year to date, including 10 in the second quarter. As is typical, these new acquisitions and greenfields initially generate lower incremental margins than our established local-account business, which reflected an unfavorable trade-off in profitability in the second quarter.

He continued: "Looking to the second half of the year, mega project activity is ramping up into the peak season as anticipated. Higher revenue growth for the rest of the year and incremental adjustments made in the second quarter to better align our local cost structure should support more normal margin and REBITDA flow through for the back half of 2024. Based on current line-of-sight to market trends, we expect to deliver record full year results and are reaffirming our annual performance targets. Despite temporarily slower growth in the more rate-sensitive local market this year, the outlook for rental demand long-term is robust as the pipeline for mega projects remains strong, data center construction is accelerating, federal infrastructure spending continues to roll out, and rental penetration increases.”