What Happened?
Shares of equipment rental company Herc Holdings (NYSE: HRI) fell 4.9% in the morning session after an analyst downgrade of a key competitor, Ashtead Group (AHT), sent ripples of concern through the equipment rental sector.
RBC Capital Markets lowered its rating on Ashtead to “underperform,” a significant shift from its previous “sector perform” rating. The bank’s analysts flagged several industry-wide problems that spooked investors. They pointed to rising costs and, crucially, overcapacity in the equipment rental market, which has squashed rental rates. The report also noted that auction data showed falling values for key types of equipment. Because these challenges affect the entire industry, the negative outlook for Ashtead dragged down sentiment for Herc as well, as investors worried it faced similar headwinds.
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What Is The Market Telling Us
Herc’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 2.4% on the news that the stock extended its positive momentum as the company completed the integration of its $5.3 billion acquisition of H&E Equipment Solutions.
According to President and CEO Larry Silber, speaking at Morgan Stanley’s 13th Annual Laguna Conference on September 11, all 165 acquired locations were expected to be on the Herc platform and operating as one company by Monday morning. The successful integration of H&E boosts Herc Rentals' scale by more than 30% and significantly expands its specialty fleet offerings. This development signals the successful execution of a major strategic move for the equipment rental company, positioning it for enhanced market presence.
Herc is down 34.6% since the beginning of the year, and at $121.68 per share, it is trading 49.1% below its 52-week high of $239.28 from November 2024. Investors who bought $1,000 worth of Herc’s shares 5 years ago would now be looking at an investment worth $3,308.
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