Breaking Down H&E Equipment Services, Inc. (HEES) Financial Health: Key Insights for Investors

You're looking at H&E Equipment Services, Inc. (HEES) right now and asking the right question: what's the real story behind the numbers, especially with that massive industry consolidation looming? Honestly, the Q1 2025 results show a company caught between a soft market and a strategic pivot, which is a tricky spot for investors.

The headline is tough: H&E reported a net loss of $6.2 million in the first quarter of 2025, a sharp contrast to the prior year, driven partly by a 14% drop in total revenues to $319.5 million and merger transaction expenses. But here's the quick math: when you strip out those one-time costs, the adjusted net income was a modest $1.2 million. This tells me the core business is still generating positive operational results, even as rental fleet utilization dipped to 60.3%. The biggest factor, defintely, is the pending merger with Herc Rentals, which is expected to close mid-year 2025 and fundamentally change the company's competitive position. So, you need to stop focusing on the Q1 loss and start mapping the value creation-or destruction-of that merger, because that's the real near-term play.

Revenue Analysis

You're looking for a clear picture of how H&E Equipment Services, Inc. (HEES) makes its money, especially with the market shifts and the Herc Rentals acquisition in 2025. The direct takeaway is that while the core rental business remains dominant, a significant drop in equipment sales, particularly used rental fleet sales, drove the overall revenue decline in the first half of the year.

For the trailing twelve months (TTM) leading up to November 2025, H&E Equipment Services' total revenue stood at approximately $1.46 Billion USD. This TTM figure represents a year-over-year revenue decrease of about -3.52%, a clear signal of cooling demand compared to the double-digit growth seen in prior years. The first quarter of 2025 was particularly tough, with total revenues dropping 14.0% to $319.5 million compared to the same quarter in 2024. That's a sharp correction.

Here's the quick math on where the money came from in the first quarter of 2025, showing the segments that matter most:

• Equipment Rentals: The primary engine, bringing in $274.0 million.
• Sales of Rental Equipment (Used): A key source of capital, generating $23.9 million.
• Parts, Service and Other Revenues: The steady maintenance and support stream, contributing about $14.2 million.
• Sales of New Equipment: The smallest segment, accounting for $7.4 million.

The Equipment Rentals segment is defintely the lifeblood of the company, making up over 85% of the Q1 2025 revenue. Even with a 7.2% decline in rental revenues, this segment's stability is what kept the overall revenue from falling further. This is why investors focus on fleet utilization and rental rates when evaluating HEES.

The biggest change, and the near-term risk, is the steep decline in equipment sales. Sales of rental equipment-the used fleet-plunged 50.3% to just $23.9 million in Q1 2025, and new equipment sales fell 28.7% to $7.4 million. This massive drop in sales revenue, driven by weak market demand and likely fleet management decisions ahead of the Herc Rentals merger, is the primary reason for the overall 14.0% revenue contraction. It's a major shift from the capital recycling model of previous years. You can dive deeper into the market reaction to the acquisition by Exploring H&E Equipment Services, Inc. (HEES) Investor Profile: Who's Buying and Why?

Here's a snapshot of the segment contributions and their year-over-year performance for Q1 2025:

The action item here is to monitor the post-merger filings from Herc Holdings, as H&E Equipment Services' financials for the latter half of 2025 are now consolidated, which will provide the final picture of the combined entity's revenue streams and growth drivers.

Profitability Metrics

You're looking at H&E Equipment Services, Inc. (HEES) to see if the recent operational headwinds are a blip or a trend, and the numbers from the first quarter of 2025 are a clear warning sign. The direct takeaway is this: while the trailing twelve months (TTM) still show solid profitability, the Q1 2025 results reveal significant margin compression driven by soft demand and merger costs.

We need to look past the TTM figures, which smooth out recent volatility, and focus on the near-term slide. For the TTM period ending March 31, 2025, the Gross Margin stood at a healthy 43.28%, the Operating Margin at 12.36%, and the Net Profit Margin at 6.21%. That's a fundamentally profitable business. But the Q1 2025 results tell a different, more urgent story.

Near-Term Margin Compression

In Q1 2025, total revenues dropped to $319.5 million, a 14.0% decline from the previous year. This revenue drop, combined with rising costs, hammered the margins. The total Gross Margin contracted sharply to 38.7% from 44.4% a year earlier. Honestly, that six-percentage-point drop is a major concern. Here's the quick math on the Q1 2025 performance:

• Gross Profit: $123.6 million (38.7% margin)
• Operating Profit: $5.75 million (1.8% margin)
• Net Loss: $6.2 million

The Operating Margin fell to a meager 1.8% in Q1 2025, down from 13.6% in Q1 2024. This dramatic drop shows that the company is struggling to cover its selling, general, and administrative (SG&A) expenses, which surged to 34.9% of revenue, up from 30.8% in the prior year. This is defintely where the operational efficiency analysis comes in.

Operational Efficiency and Industry Context

The margin pressure is rooted in operational challenges and market conditions. The core equipment rental business saw its gross margin fall to 38.2% in Q1 2025 from 43.3% in Q1 2024. This was driven by two key factors: lower rental rates (down 2.0% year-over-year) and weaker utilization, with average rental fleet utilization falling from 63.6% to 60.3%. Lower utilization means more expensive fleet sitting idle.

To be fair, the equipment rental market is still growing, with the overall North American market projected to grow 5.7% in 2025 to nearly $82.6 billion. HEES is operating in a growing industry, but its Q1 results show it's not capturing that growth efficiently right now. The net loss of $6.2 million was heavily influenced by $9.8 million in merger-related transaction expenses, so the adjusted net income was a positive, but small, $1.2 million. The merger with Herc Rentals, expected to close mid-year 2025, is the high-stakes gamble here, promising future synergies that could offset these current losses.

Here is a snapshot of the key profitability ratios:

The immediate action is to watch the Q2 2025 report closely for any signs of cost control or utilization improvement, especially as the merger nears completion. You can review the strategic context here: Mission Statement, Vision, & Core Values of H&E Equipment Services, Inc. (HEES).

Debt vs. Equity Structure

When you look at how H&E Equipment Services, Inc. (HEES) financed its growth, the picture is one of significant leverage, which is typical for a capital-intensive business like equipment rental. But the most critical factor for 2025 is the mid-year acquisition by Herc Holdings Inc., which fundamentally changed the debt landscape.

Before the June 2025 acquisition, H&E Equipment Services, Inc.'s balance sheet showed a substantial reliance on debt to fund its massive rental fleet. As of March 2025 (Q1), the company's total debt stood at approximately $1.60 billion USD. This debt includes both short-term obligations and long-term financing, with long-term debt noted around $114 million in Q1 2025, though total liabilities were closer to $2 billion. The company's common equity was roughly $600 million, providing the shareholder cushion.

Here's the quick math on leverage:

The Debt-to-Equity (D/E) ratio is the key metric here, showing how much debt is used for every dollar of shareholder equity. For H&E Equipment Services, Inc., this ratio was reported as high as 2.95 in February 2025, and around 2.09 closer to the acquisition date. This is a high number, but let's put it in context:

• H&E Equipment Services, Inc. D/E (2025): ~2.09 to 2.95
• Industry Median D/E (Equipment Rental): 1.83 to 1.99 (2024-2023)

Honestly, a D/E ratio above 2.0 is high, even for this industry, which naturally uses more debt to buy expensive equipment. The industry median sits just below 2.0, so H&E Equipment Services, Inc. was defintely more leveraged than its peers, indicating a more aggressive financing strategy that prioritized debt funding over issuing new equity to fuel fleet expansion.

The entire debt conversation pivoted in June 2025 when Herc Holdings Inc. completed the acquisition. The transaction valued H&E Equipment Services, Inc. at approximately $5.3 billion, which included the assumption of H&E's debt. Shares of H&E Equipment Services, Inc. ceased trading and were delisted from the NASDAQ on June 3, 2025.

In connection with financing this deal, Herc Holdings Inc. issued significant new debt, including $1.65 billion in senior notes due 2030 and another $1.1 billion in senior notes due 2033. This action essentially rolled H&E Equipment Services, Inc.'s debt into the larger, newly financed structure of Herc Holdings Inc. The debt financing was a crucial component of the merger, showing that the growth strategy for the combined entity is still heavily reliant on debt capital markets.

The key takeaway for you is that the company's independent debt-to-equity balancing act is over; it's now a component of Herc Holdings Inc.'s capital structure. For a deeper dive into the pre-merger financial health, you can check out the full post on Breaking Down H&E Equipment Services, Inc. (HEES) Financial Health: Key Insights for Investors.

Liquidity and Solvency

When you look at H&E Equipment Services, Inc. (HEES), the first thing we need to nail down is their near-term financial flexibility, or liquidity. This tells us if they can cover their bills coming due in the next year. You want to see a solid cushion, especially in the capital-intensive equipment rental business.

The company's liquidity ratios, based on the latest trailing twelve months (TTM) data ending in mid-2025, suggest a healthy position. The Current Ratio sits at approximately 1.92, meaning H&E Equipment Services, Inc. holds $1.92 in current assets for every dollar of current liabilities. This is a strong signal. The Quick Ratio (or acid-test ratio), which strips out less-liquid assets like inventory, is also robust at about 1.67. That's a defintely comfortable margin, indicating they can cover short-term debt even without selling off their parts and new equipment inventory.

• Current Ratio: 1.92 (Strong short-term coverage).
• Quick Ratio: 1.67 (High ability to pay without relying on inventory sales).

Here's the quick math: a ratio above 1.0 is generally good, so H&E Equipment Services, Inc. is well-positioned, which is crucial for a company that must constantly invest in its rental fleet to maintain a competitive edge, aligning with their Mission Statement, Vision, & Core Values of H&E Equipment Services, Inc. (HEES).

Working Capital and Near-Term Pressures

The working capital trend, which is simply current assets minus current liabilities, shows a strong structural position, but the first quarter of 2025 revealed some near-term pressures. The company reported a net loss of $6.2 million in Q1 2025, largely driven by $9.8 million in transaction expenses related to the pending merger with Herc Rentals. This kind of one-time cost hits working capital directly. Plus, cash reserves dipped to a low of $10.3 million in Q1 2025.

Still, the underlying operational strength is what matters most here. The company's business model is built on generating cash from its core rental operations, which is why the cash flow statement is your best friend. The Q1 dip in cash is a watch-out, but not a panic button, especially with the merger expected to close mid-year 2025, which should unlock cost synergies down the road.

Cash Flow Statement Overview

The cash flow statement for the TTM period ending in mid-2025 paints a picture of a business that generates significant internal cash. This is a major strength, as it funds the massive capital expenditure (CapEx) required to keep the rental fleet young and competitive. They consistently report positive operating cash flows, which is the lifeblood of any equipment company.

The positive Free Cash Flow (FCF) of $213.74 million shows that H&E Equipment Services, Inc. is generating more cash than it needs for its day-to-day operations and necessary fleet replacement/expansion. This surplus is what allows them to pay a regular quarterly cash dividend of $0.275 per share, even amidst the short-term merger-related costs.

The biggest near-term risk is the low cash reserve of $10.3 million in Q1 2025, which is a tight buffer against unexpected operational costs or a delay in the merger. However, the strong OCF and the high Current/Quick Ratios suggest they have access to capital or other current assets to manage a short-term crunch. The core business is sound, but the merger process is creating temporary financial choppiness.

Valuation Analysis

You're looking at H&E Equipment Services, Inc. (HEES) after a massive run-up, and the question is simple: Is the stock overvalued or is the market pricing in future growth? Honestly, the valuation multiples suggest the latter, but you need to look past the headline numbers to see the real picture.

As of November 2025, H&E Equipment Services, Inc. trades at a premium to its historical averages and many peers in the equipment rental space. The price-to-earnings (P/E) ratio, which tells you how much investors are willing to pay for every dollar of annual earnings, sits at a trailing twelve-month (TTM) figure of about 38.01. To be fair, that's significantly higher than its historical ten-year average of 10.40. Here's the quick math on the key multiples:

• Price-to-Earnings (P/E): 38.01 (TTM, Nov 2025)
• Price-to-Book (P/B): 5.75 (Nov 2025)
• Enterprise Value-to-EBITDA (EV/EBITDA): 20.72

A P/B ratio of 5.75 is high for an asset-heavy business like equipment rental, meaning the stock price is trading at nearly six times the company's book value (assets minus liabilities). The Enterprise Value-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) of 20.72 also points to a rich valuation, as this metric is often used to compare capital-intensive companies. This valuation defintely prices in a lot of optimism, likely driven by the construction and infrastructure tailwinds.

Stock Performance and Dividend Profile

Investors who got in early have seen a huge payoff. Over the last 12 months leading up to May 2025, H&E Equipment Services, Inc.'s stock price increased by nearly 99.79%, closing at $94.64 on May 30, 2025. That kind of performance is a powerful signal of market excitement, but it also creates the risk of a pullback if growth slows. The 52-week range shows a dramatic climb from a low of $40.92 to a high of $101.28.

On the income side, the company offers a modest but stable dividend. The annual dividend is $1.10 per share, resulting in a dividend yield of about 1.16%. The payout ratio-the percentage of earnings paid out as dividends-is manageable at 44.12%, suggesting the dividend is well-covered by current earnings and leaves ample cash for fleet investment (capital expenditures).

Analyst Consensus and Near-Term Outlook

The Wall Street consensus is mixed, which is a classic sign of a stock at an inflection point-it's not cheap enough to be a clear 'Buy,' but the business fundamentals are too solid for a 'Sell.' The most recent consensus from a number of analysts is a Hold rating. The average 12-month price target is a tight range, generally falling between $86.70 and $98.05. This implies most analysts see the stock as fairly valued right now, with a potential downside of -8.39% to a modest upside of 3.6% from the May 2025 price.

What this estimate hides, however, is the major corporate action that took place. You need to know that H&E Equipment Services, Inc. was acquired by Herc Holdings Inc. (HRI) on June 2, 2025. This acquisition fundamentally changes the investment profile. If you are still holding HEES shares, your focus should immediately shift to the terms of the acquisition and the prospects of the combined entity. For a deeper dive into the players involved, you can check out Exploring H&E Equipment Services, Inc. (HEES) Investor Profile: Who's Buying and Why?

Your action here is clear: look at the acquisition details. The standalone valuation of H&E Equipment Services, Inc. is now a historical footnote; the value is tied to the merger terms and the outlook for the new combined company.

Risk Factors

You're looking at H&E Equipment Services, Inc. (HEES) and seeing a major strategic shift, but you also need a clear-eyed view of the risks. The biggest near-term challenge is navigating a soft market while executing a massive merger. The Q1 2025 results show the pressure: total revenue fell by a significant 14.0% to $319.5 million year-over-year, leading to a net loss of $6.2 million. You can't ignore those numbers. The merger with Herc Rentals is the main action plan, but it's also a source of immediate financial risk.

Here's the quick math: the business environment is making money harder to come by, and the merger adds significant one-time costs. In Q1 2025 alone, H&E Equipment Services, Inc. incurred $9.8 million in merger-related expenses. That's a direct hit to the bottom line, turning an adjusted net income of $1.2 million into a GAAP net loss. Plus, the company has consistently high interest expense, which has been running around $13 million to $19 million per quarter, weighing heavily on net income.

• External Market Risk: Weak demand in local construction and industrial sectors is the primary headwind.
• Operational Risk: Equipment rental revenue dropped 7.2% to $274.0 million, driven by lower average rental rates (down 2.0%) and weaker time utilization, which fell to 60.3% from 63.6% in the prior-year quarter.
• Financial Risk: Gross margin contracted sharply to 38.7% in Q1 2025 from 44.4% a year earlier, a clear sign of pricing pressure and utilization issues.

Strategic and Financial Mitigation

The company is defintely not standing still. The entire strategy is centered on the merger with Herc Rentals, which is expected to close by mid-year 2025. The goal is to create a rental powerhouse with a combined fleet valued at approximately $6.4 billion, which should improve operating resiliency through broader end-market and geographic diversification.

To be fair, the management is taking concrete financial steps to prepare for the integration. They suspended the regular quarterly cash dividend for June 2025, a move designed to strengthen the company's financial position ahead of the merger. Operationally, they are still pursuing their branch expansion strategy, opening four new locations in Q1 2025 to compete more effectively in key markets. This combination of aggressive expansion and strategic consolidation is their bet against the current market softness.

What this estimate hides is the execution risk of combining two massive rental fleets and integrating over 160 branches, a process that can easily hit snags and cost more than anticipated. Still, the combined entity is positioned to be a major player. For a deeper dive into the players involved in this strategic move, you should read Exploring H&E Equipment Services, Inc. (HEES) Investor Profile: Who's Buying and Why?

Here is a summary of the key financial pressures from the first quarter of 2025:

Finance: Monitor the merger's progress and synergy realization against the projected mid-year 2025 close date.

Growth Opportunities

The future growth story for H&E Equipment Services, Inc. (HEES) is not about incremental gains; it's about a massive, transformative merger. Your primary growth driver is the pending acquisition by Herc Rentals, a deal valued at $2.8 billion, which is set to fundamentally reshape the equipment rental landscape by mid-2025. This move is a clear, decisive action to gain scale and operational resilience in a cyclical industry.

This strategic initiative immediately addresses the need for market expansion and deeper penetration. The combined entity will boast a rental fleet valued at approximately $6.4 billion and operate from more than 400 branches across North America. Honestly, that kind of scale is a game-changer for negotiating power and geographic reach. Plus, HEES is not waiting around; they continue with organic expansion, opening four new branches in the first quarter of 2025 alone to enhance local market presence.

Despite some near-term market softness, the analyst consensus points to solid earnings growth for the fiscal year. We are projecting H&E Equipment Services, Inc.'s earnings per share (EPS) to grow from $3.25 per share to an estimated $3.85 per share for the next year, representing a growth of 18.46%. This growth is largely predicated on the anticipated cost savings (synergies) and operational efficiencies from the merger.

Here's the quick math on the 2025 financial picture, using the latest trailing twelve months (TTM) data and analyst estimates:

What this estimate hides, to be fair, is the Q1 2025 revenue decline of 14% to $319.5 million, driven by weak local demand and merger-related expenses. Still, the long-term competitive advantages are defintely compelling.

H&E Equipment Services, Inc.'s core competitive advantage lies in its focus on heavy construction and industrial equipment and its commitment to a young fleet. The average age of their rental fleet is only 43.2 months, which is below the industry average. This means lower maintenance costs and higher utilization rates over time, which is crucial for maximizing return on invested capital (ROIC). This operational efficiency, combined with the new scale from the merger, positions the company for stronger performance once the integration is complete and construction markets stabilize.

• Maintain a young fleet (43.2 months) for efficiency.
• Gain market share via the Herc Rentals merger.
• Leverage geographic diversification for resilience.

Your next step is to analyze the merger details to quantify the synergy estimates and integration risks. Exploring H&E Equipment Services, Inc. (HEES) Investor Profile: Who's Buying and Why? will give you more context on the shareholder reaction.