For the rental equipment industry these days, profits are up, lots of money is being spent and happy
faces abound. While machine manufacturers are scratching their heads about
when “real growth” in sales of machines
might come along, the folks in rental
equipment are planning for more growth
with higher and higher rental revenues.
Contractors are switching over to using rental equipment rather than purchasing new machines. As has been
noted here, during the recession, contractor fleets were sold off or reduced
severely for cash flow reasons and for
the lack of long-term work. Since then,
many contractors have decided that until they see real growth and a healthy
economy, they will keep their equipment fleets lean and rely more heavily
on rental machines.
We estimate that the rental industry,
including party and consumer rentals,
had revenues exceeding $30 billion in
2013, up nicely from 2012. From our
standpoint, the equipment side of the
rental business is about 45% of this
total. The rental equipment industry purchased approximately 64% of all equipment sold by OEMs and their dealers,
counting sales to rental houses or machines used for rental by dealers. This
trend is likely to continue until we have a
more robust construction market.
Rental penetration, the amount of ma-
chinery used by owner-operators vs.
rental, is slowly growing in favor of the
rental side each year. Industrywide, U.S.
heavy-equipment rental penetration (de-
pending on the definition) is estimated
at between 50 and 55%. It’s expected to
approach 60% by 2015 or shortly there-
after. However, if rental penetration is
defined as being the total fleet available
for work, then the amount of equipment
in the field and in private ownership out-
side of rental likely makes rental pen-
etration less than 50%.
Rental houses are looking for new
markets so they can rely less on traditional construction applications for their
revenue. In April, United Rentals purchased National Pump of Beaumont,
Texas, and opened 18 new specialty
locations. Management expects to open
another 13 operations specializing in
power and HVAC, trench safety or tool
and industrial solutions this year.
Hertz Equipment Rental Corp. (HERC)
has been expanding into specialty niche
markets for several years as a way to
differentiate itself from other major
rental players. In 2013, 36% of its rental
revenue came from specialty rentals.
Sunbelt Rentals has also branched out
into specialty segments and has divisions that specialize in climate control
services, oil and gas, pile driving and
Industrywide, average rental fleet age
decreased in 2013 because of the large
amount of capital invested in new machinery. The top five in the industry had
average fleet ages running from 35 to
45 months, all lower than the previous
year and most certainly below the fleet
ages reported four or five years ago.
Healthy cash flows are essential to
rental companies, and rental rates are
critical to that end. The rental equipment industry increased rental rates
between 3. 5 and 7% during 2013, as
demand was strong. Looking at 2014,
rental rates should increase, assuming
demand remains strong as industry executives expect.
United Rentals dwarfs most other
companies in the industry, with rental
revenues in 2013 of $4.6 billion out of
a total of $4.9 billion revenues for all ac-
tivities. This compares to rentals of $3.8
billion in 2012 and $2.4 billion in 2011
(prior to the acquisition of RSC). United
has 876 locations in North America,
which tops all companies.
Sunbelt Rentals, part of the Ashtead
Group of the United Kingdom, is sec-
ond with revenues of $1.9 billion (lat-
est 12 months through January 2014)
compared to $1.6 billion in 2013 (April
fiscal year). Sunbelt has 416 locations
in North America and is making acqui-
sitions to expand its fleet and services.
Everyone knows Hertz, primarily be-
cause of car rentals, but the HERC side
of the business accounted for rental
revenues of roughly $1.5 billion in 2013
versus $1.4 billion in 2012. Hertz man-
agement is separating the equipment
rental side from the car rental business,
which is expected to occur in early 2015.
Other major companies include Blue-
Line Rental (formerly Volvo Rents) which
finished 2013 with $425 million in rental
revenues from 132 locations. Volvo Con-
struction Equipment sold its rental busi-
ness early in 2014 to Platinum Equity for
$1.1 billion. Ahern Rentals, the largest
family-owned company, had rental reve-
nues of $346 million in 2013. NES Rental
Holdings, owned by private equity group
Diamond Castle Holdings had estimated
rentals in the range of $290 million.
Cat dealers in North America had
estimated rental revenues of $2.6 billion, with roughly 500 Cat Rental Stores
serving North America. We know of 29
Cat Rental Stores listed in the top 100
rental equipment businesses with revenues of $2.2 billion.
I look for continued annual growth of
about 8% in rental revenues, which is
very good. It’s Happy Hour in rental —
let the fun continue! dp
It’s Happy Hour In
The Rental Industry
CHARLES YENGST www.yengstassociates.com — firstname.lastname@example.org
CHARLES R. YENGST IS