Herc Holdings Inc.
HRI
$121.57
-1.96%
Herc Holdings Inc. is a North American equipment rental company, spun out of Hertz Global in 2016, that rents construction, industrial, and specialty equipment to commercial, industrial, and residential construction customers from roughly 450 locations concentrated in the top 100 U.S. metropolitan markets. It is the third-largest player in North America behind United Rentals and Sunbelt Rentals, with approximately 6% market share pro forma for its 2025 acquisition of H&E Equipment Services, and it differentiates itself through a local-customer-weighted mix (roughly 60% local versus 40% national accounts) and a growing portfolio of bundled specialty solutions. The current investor debate centers on the integration and financial leverage implications of the transformational H&E acquisition, which roughly doubled the revenue base year over year but has coincided with a sharp rise in interest expense and a deeply negative trailing free cash flow profile. Sentiment has soured materially through 2026, with the stock down roughly 20% year-to-date and underperforming the S&P 500 by over 32 percentage points, as investors weigh whether acquisition-driven scale and expected EPS recovery can offset balance-sheet strain and cyclical construction demand uncertainty.…
HRI
Herc Holdings Inc.
$121.57
HRI 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Herc Holdings Inc.'s 12-month outlook, with a consensus price target around $182.67 and implied upside of +50.3% versus the current price.
Average Target
$182.67
0 analysts
Implied Upside
+50.3%
vs. current price
Analyst Count
—
covering this stock
Price Range
$135 - $240
Analyst target range
Coverage is solid with 12 analysts, and the consensus is bullish: the recommendation is "buy" with a mean rating of 1.73 (where 1 is Strong Buy), and the average target price of $182.67 implies roughly +50% upside from the current $121.57. That is a striking disconnect between analyst conviction and price action — the stock is down 20.2% year-to-date while the consensus target sits 50% above the market, suggesting either that analysts are anchoring to pre-de-rating estimates or that the market is materially more pessimistic about the H&E integration and leverage than the sell side. The consensus leans clearly bullish, but the gap between price and target is a warning sign that estimates may be stale or that the market is discounting risks the analysts are not.
The target range is very wide, from a low of $135.00 (still +11% above the current price) to a high of $240.00 (+97%), a spread of 78% of the current price that signals high uncertainty and low conviction in the precise earnings path. The high target assumes successful integration, margin recovery toward historical gross margins near 39%, and multiple expansion back toward peer levels, while the low target of $135 prices in continued margin compression and leverage constraints but still embeds upside — notably, even the most bearish analyst sees the stock above today's price, which is unusual and may reflect estimates set before the recent selloff. Institutional ratings show a pattern of stable-to-positive actions — KeyBanc upgraded to Overweight from Sector Weight in December 2025, and Citigroup, Baird, Barclays, and Wells Fargo have maintained Buy/Overweight/Outperform ratings through 2026, with JP Morgan the lone Neutral — so there have been no recent downgrades, but the absence of fresh upgrades during a 20% drawdown suggests analysts are waiting for integration evidence before adjusting targets.
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Bulls vs Bears: HRI Investment Factors
The bear case currently has stronger near-term evidence: leverage at 5.73x debt-to-equity, negative $135 million trailing FCF, gross margin compression from 39.3% to 27.0%, and a stock down 20.2% YTD with -14.81% one-month momentum. The bull case rests almost entirely on forward estimates — 11.17x forward PE against $23.73 of 2027 EPS and a $182.67 average target — which are unverified by delivered results. The single most important tension is whether H&E integration restores gross margins toward the high-30s and turns FCF positive before interest costs of $134 million per quarter and cyclical construction demand force a balance-sheet reckoning. If margins normalize, the discount is a value opportunity; if they stall, the equity is a leveraged bet on a cycle that is already decelerating.
Bullish
- Analyst targets imply ~50% upside: 12 analysts carry a consensus 'buy' rating (mean 1.73) with an average target of $182.67 versus the $121.57 price, roughly +50% upside. Even the lowest target of $135 sits +11% above the current price, an unusual configuration suggesting the sell side sees the recent de-rating as overdone.
- Forward PE of 11.2x prices deep skepticism: The forward PE of 11.17x and EV/EBITDA of 10.52x sit at a discount to premium rental peers, while PS is just 1.06x versus 4.09x at year-end 2025 and 5.65x at year-end 2024. Consensus 2027 EPS of $23.73 versus essentially zero trailing EPS means the market is paying very little for a large expected earnings recovery.
- H&E deal roughly doubled the revenue base: Q4 2025 revenue of $1.209 billion grew 27.13% YoY, and quarterly revenue rose from $861 million in Q1 2025 to $1.304 billion in Q3 2025 as H&E consolidated. Pro forma market share of ~6% and 450 locations in the top 100 US metros create scale-based purchasing and fleet productivity levers.
- Sequential EPS recovery underway: EPS moved from -$0.63 in Q1 2025 and -$1.17 in Q2 to +$0.90 in Q3 and +$0.72 in Q4 2025, with Q4 EBITDA of $493 million at a 40.8% EBITDA margin. The trajectory shows the acquired business is already contributing positive earnings despite integration costs.
Bearish
- Leverage is the central risk: Debt-to-equity is 5.73x, the equity multiplier is 7.07x, and interest expense jumped from $62 million in Q1 2025 to $134 million in Q3 and Q4 2025. Q4 interest coverage of roughly 1.30x means a modest EBITDA decline could pressure covenant headroom.
- Free cash flow deeply negative: Trailing free cash flow is -$135 million, with quarterly FCF of -$49 million, -$40 million, -$99 million, and +$53 million across 2025 and $296 million of capex in Q4 alone. The company is dependent on external financing, evidenced by a $4.19 billion financing inflow in Q2 2025.
- Margins collapsed post-acquisition: Gross margin fell from 39.3% in Q4 2024 to 27.0% in Q4 2025, and trailing net margin is effectively 0.02% with ROE of 0.05%. Q4 2025 EBITDA of $493 million was consumed by $319 million of D&A and $134 million of interest, leaving only $17 million of pre-tax income.
- Momentum and relative strength deteriorating: The stock is down 14.81% over one month and 18.67% over three months, trailing SPY by 16.03 and 21.36 percentage points respectively, with lower highs from the September $146 area. Beta of 2.049 and a max drawdown of -49.73% mean downside moves are amplified.
HRI Technical Analysis
HRI is in a corrective downtrend within a broader range, with the stock down 6.01% over the past year and 20.20% year-to-date, and at $121.57 it sits at roughly 33% of its 52-week range of $88.45 to $188.35 — closer to the lows than the highs. That positioning reflects a market that has de-rated the shares from their August peak near $173.51, and while the 6-month change remains positive at +10.34%, the stock has surrendered most of that advance, leaving it in a vulnerable mid-range posture rather than a clean value or momentum setup. The 52-week high of $188.35 is now 55% above the current price, underscoring how much ground has been lost from the cycle highs.
Short-term momentum is decisively negative and diverging from the still-positive 6-month trend: the 1-month change is -14.81% and the 3-month change is -18.67%, both sharply worse than the +10.34% six-month figure, signaling that the mid-year rally has rolled over into a sustained distribution phase. Relative strength confirms the underperformance — HRI trails SPY by 16.03 percentage points over one month and 21.36 points over three months, while the 6-month relative strength is still marginally positive at +2.86%, a classic deceleration pattern where the stock led earlier in the year and is now lagging badly. The most recent session closed at $121.57, down 1.96% on the day, extending a sequence of lower highs from the September $146 area, and the lack of a volume surge on down days (volume 1.32 million) suggests persistent selling pressure rather than capitulation.
Key technical levels are well defined: support sits at the 52-week low of $88.45, roughly 27% below the current price, while resistance is anchored at the $188.35 high, with intermediate resistance around the $146–$153 zone where the stock repeatedly failed in September and October. A decisive break below the recent $121–$124 shelf would open the door toward the $100s and ultimately the 52-week low, while reclaiming $146 would be the first sign of a trend repair. With a beta of 2.049, HRI is roughly twice as volatile as the market, and its max drawdown of -49.73% over the period illustrates the severity of downside risk — position sizing must account for this high-beta, high-drawdown profile, and the short ratio of 3.55 days suggests meaningful short interest that could amplify moves in either direction.
Beta
2.05
2.05x market volatility
Max Drawdown
-49.7%
Largest decline past year
52-Week Range
$88-$188
Price range past year
Annual Return
-6.0%
Cumulative gain past year
| Period | HRI Return | S&P 500 |
|---|---|---|
| 1m | -14.8% | +0.2% |
| 3m | -18.7% | +2.9% |
| 6m | +10.3% | +8.4% |
| 1y | -6.0% | +14.9% |
| ytd | -20.2% | +11.9% |
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HRI Fundamental Analysis
Revenue is growing rapidly but almost entirely through acquisition: Q4 2025 revenue of $1.209 billion was up 27.13% year over year versus $951 million in Q4 2024, and the quarterly progression from $861 million in Q1 2025 to $1.304 billion in Q3 2025 reflects the H&E consolidation rather than organic acceleration. Equipment rental dominates the mix at $1.313 billion, with sales of revenue-earning equipment at $147 million and other rental revenue at $110 million, so the core rental book is the growth engine while ancillary lines are small. The key question for the investment case is whether this scale translates into durable organic growth once the acquisition laps, particularly given the cyclical construction end-market and the fact that the revenue jump has come alongside a sharp rise in interest expense from $62 million in Q1 2025 to $134 million in Q3 and Q4 2025.
Profitability is thin and volatile: Q4 2025 net income was just $24 million on $1.209 billion of revenue (a 1.99% net margin), Q3 2025 delivered $30 million (2.30% margin), and the first half of 2025 posted losses of -$18 million and -$35 million. Gross margin has compressed from 39.3% in Q4 2024 to 27.0% in Q4 2025, and the trailing gross margin of 28.2% with a 15.3% operating margin shows that depreciation and interest costs are consuming most of the EBITDA — Q4 2025 EBITDA of $493 million (40.8% EBITDA margin) looks healthy, but $319 million of D&A and $134 million of interest expense leave only $17 million of pre-tax income. The reported EPS of $0.72 in Q4 2025 and $0.90 in Q3 2025 contrasts with the deeply negative -$1.17 and -$0.63 prints in Q2 and Q1 2025, so the trajectory is improving sequentially but remains fragile and highly sensitive to rental rates and utilization.
Balance-sheet leverage is the central risk: debt-to-equity stands at 5.73x, the debt ratio is 0.81, and the equity multiplier is 7.07x, reflecting the debt-funded H&E deal and heavy fleet capex. Free cash flow is negative on a trailing basis at -$135 million, with quarterly FCF of -$49 million, -$40 million, -$99 million, and +$53 million across 2025, and capital expenditures of $296 million in Q4 alone — the company is consuming cash to grow the fleet and is dependent on external financing, as evidenced by the $4.19 billion financing inflow in Q2 2025. ROE is effectively zero at 0.05% and ROA is 2.87%, while the current ratio of 1.31 provides only modest liquidity cushion; the interest coverage ratio of 1.30x in Q4 2025 is dangerously thin and means a modest EBITDA decline could pressure covenant headroom.
Quarterly Revenue
$1.2B
2025-12
Revenue YoY Growth
+27.1%
YoY Comparison
Gross Margin
27.1%
Latest Quarter
Free Cash Flow
$-135000000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HRI Overvalued?
Because trailing net income is barely positive (EPS of $0.0002), the trailing PE of 4,636.9x is meaningless and I therefore lead with the forward PE of 11.17x and the EV/EBITDA of 10.52x as the primary metrics, supplemented by the PS ratio of 1.06x and EV/Sales of 2.81x. The enormous gap between the 4,636.9x trailing PE and the 11.17x forward PE implies the market expects a dramatic earnings recovery — consensus 2027 EPS of $23.73 versus essentially zero trailing EPS — which is a high-conviction bet on acquisition synergies and margin normalization rather than a valuation supported by current earnings.
On peer comparison, HRI's 11.17x forward PE and 10.52x EV/EBITDA sit at a discount to what premium rental peers such as United Rentals typically command, and its 1.06x PS ratio is low in absolute terms, reflecting the market's skepticism about the quality and durability of the acquired revenue. The 2.38x P/B and 4.15x P/CF are moderate, but the negative PEG ratio of -46.57 and the 87% payout ratio (dividend yield 1.87%) signal that the dividend is not well covered by earnings and that growth-adjusted valuation is distorted by the depressed earnings base. The discount versus the sector appears justified by inferior profitability (0.02% net margin versus the 15.3% operating margin that peers convert more efficiently) and by the 5.73x debt-to-equity leverage, which is well above the balance-sheet quality of the market leader.
Historically, HRI's own valuation band tells a cautionary story: the PS ratio was 4.09x at year-end 2025 and 5.65x at year-end 2024, versus just 1.06x today, and the P/B has fallen from 3.85x in Q4 2024 to 2.38x now, placing the stock near the bottom of its multi-year valuation range. The trailing PE history is unusable given the earnings collapse, but the EV/EBITDA multiple of 10.52x compares with 32.56x at year-end 2025 and 41.13x at year-end 2024 on the historical ratios data, showing how the EBITDA base has expanded through the acquisition while the equity value has compressed. This combination — low absolute multiples, depressed margins, and high leverage — suggests the market is pricing in either a value opportunity if integration succeeds or fundamental deterioration if construction demand weakens; the burden of proof is on management to deliver the forward EPS the consensus assumes.
PE
4636.9x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 7x~23x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
10.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are dominated by the debt-funded H&E acquisition. Debt-to-equity of 5.73x and an equity multiplier of 7.07x sit alongside quarterly interest expense that doubled from $62 million in Q1 2025 to $134 million in Q3 and Q4, leaving Q4 interest coverage near 1.30x. Trailing free cash flow of -$135 million and $296 million of Q4 capex mean the fleet expansion is externally financed, and the current ratio of 1.31 offers only a modest liquidity cushion. Revenue is also concentrated in cyclical construction rental, and the 27.13% Q4 revenue growth is acquisition-driven rather than organic, so the organic growth rate once H&E laps is unproven.
Market and competitive risks center on valuation compression and cyclicality. HRI trades at 11.17x forward PE and 10.52x EV/EBITDA, a discount to premium peer United Rentals that is arguably justified by a 0.02% net margin and 5.73x leverage, but the stock's beta of 2.049 means it is roughly twice as volatile as the market and highly sensitive to rate and construction-spending expectations. The shares have trailed SPY by 32.13 percentage points YTD and by 21.36 points over three months, and the short ratio of 3.55 days indicates meaningful short interest that can amplify declines. As the third-largest player with ~6% share against United Rentals and Sunbelt, HRI lacks the pricing power to defend rental rates in a softening market.
In a worst case, construction demand rolls over, rental rates and utilization fall, and the $493 million quarterly EBITDA base compresses just as $134 million of quarterly interest comes due. With coverage at 1.30x, a mid-teens EBITDA decline would strain covenants, forcing asset sales or an equity raise that dilutes shareholders. The 52-week low of $88.45 is 27% below the current $121.57, and the historical max drawdown of -49.73% shows how far the stock can fall in a cycle; a move to the 52-week low would cost investors roughly -27%, and a repeat of the max drawdown would imply a price near $61.
