HEES’ Earnings a Penny Ahead (ASTE) (HEES) (MTW) (TEX)

H&E Equipment Services Inc. (HEES) reported first-quarter 2013 earnings of 14 cents per share, up 27% year over year and a penny ahead of the Zacks Consensus Estimate on the back of strong demand for rental equipment as well as new and used equipment.

Total revenue increased 225 to $212 million, beating the Zacks Consensus Estimate of $200 million, driven by growth across all segments. Rental revenues rose 26% year over year to $75.4 million on the back of higher rates and a larger fleet. New equipment sales increased 30.1% to $53.3 million and used equipment sales increased 21.2% to $32.1 million. Parts sales increased 6.7% to $25.0 million from $23.4 million in the first quarter of 2012. Service revenues went up 9.4% to $14.6 million from $13.3 million a year ago.

Cost and Margins

Cost of sales increased 22% to $148 million in the quarter. Gross profit went up 22% to $64.5 million. Gross margin remained flat year over year at 30%. Rental gross margins increased to 44.6% in the first quarter from 42.4% in the prior-year quarter. Rental rates were 10.2% higher than the year-ago period rates.

Gross margins on new equipment sales were 10.5%, down from 12.3% in the first quarter a year ago. Gross margins on used equipment sales were 29.2% compared to 29.8% a year ago. Gross margins on parts sales were 26.6% compared with 27.6% in the first quarter of 2012. Gross margins on service revenues were 60.5% for the first quarter of 2013 compared to 61.5% in the first quarter of 2012.

Selling, general and & administrative expenses increased 14% to $46 million, due to higher salaries, wages and payroll taxes, driven by increase in commission and incentive pay that resulted from higher rental and sales revenues. Furthermore, higher health insurance costs, branch expansion and depreciation led to the increase. Operating profit increased 53% to $18.7 million and operating margin expanded 170 bps to 8.8%.

EBITDA (earnings before interest taxes, depreciation and amortization) increased 32.6% to $51.3 million. EBITDA margin in the quarter was 24.2% compared to 22.3% in the year-ago quarter.

Financial Updates

Cash and cash equivalents were $3 million as of Mar 31, 2013 compared with $9 million as of Dec 31, 2012. Total debt amounted to $686 million as of Mar 31, 2013 compared with $690 million as of Dec 31, 2012.

Rental Fleet

As of Mar 31, 2013, the original acquisition cost of H&E Equipment Services’ rental fleet was $897.6 million versus $745.7 million as of Dec 31, 2012. Dollar utilization was 33.9% compared to 32.3% for the first quarter of 2012. Dollar returns improved reflecting higher rates.

H&E Equipment Services continues to capitalize on improving market conditions, particularly the soaring demand for rental equipment. The distribution business also performed well with strong double-digit revenue growth witnessed in both new and used equipment sales.

H&E Equipment Services’ outlook for 2013 remain positive given that the construction industry is in the early stages of a multi-year expansion cycle. H&E Equipment Services will continue to step up its fleet investment during the year, based on current and expected demand levels. Furthermore, with its increasing exposure in the industrial sector, H&E Equipment Services is well positioned to increase its market share, realize economies of scale and drive operational efficiencies throughout 2013.

Baton Rouge, La.-based H&E Equipment Services, rents, sells, and provides parts and service support for hi-lift or aerial work platform equipment, crane, earthmoving equipment, and industrial lift truck categories. It offers heavy construction and industrial equipment for rent on a daily, weekly, and monthly basis. H&E Equipment Services Inc. retains a Zacks Rank #3 (Hold).

Peer Performance

Astec Industries Inc. (ASTE) reported first-quarter earnings of 57 cents per share, rising 10% from the 52 cents in the year-earlier quarter and ahead of the Zacks Consensus Estimate of 53 cents.

Manitowoc Company, Inc. (MTW) reported adjusted earnings from continuing operations of 9 cents per share, compared with the break-even results in the prior-year quarter but fell short of the Zacks Consensus Estimate of 14 cents.

On the other hand, Terex Corp.’s (TEX) adjusted earnings of 23 cents per share declined 21% from 29 cents earned in the year-ago quarter, missing the Zacks Consensus Estimate of 28 cents.