Daniel M. Miller
Daniel M. Miller is executive vice president at Gabelli Funds, and portfolio manager of the $120 million Gabelli Focus Five Fund (GWSAX), Rye, New York. Gabelli.com
This week’s Stock of the Week is succeeding in an area that its parent company struggled with.
Herc Holdings Inc. (HRI) is benefiting from having been spun off last year from car-rental company Hertz. Herc’s rentals range from earthmoving equipment and trucks to air compressors, lighting equipment, generators and safety supplies. It also offers equipment for pumping, power generation, climate control and other needs. These items were not a good fit for Hertz, which managed the division poorly, but Herc’s new management is turning the spin-off into a strong company in its field.
Herc has some rental locations outside the US but is mainly a US-focused company that will benefit as US infrastructure spending rises. It inherited some debt and liabilities from Hertz, but those will lapse soon, improving the balance sheet. Earnings were impacted last year and this year due to costs associated with the spin-off as well as lower equipment sales. However, Herc has had five consecutive quarters of year-over-year pricing improvement (meaning it was able to raise the prices it charges) and has also improved its fleet management.
This part of the rental industry is consolidating, so Herc might buy competitors or itself become a takeover target. Revenue was $1.56 billion in 2016 and will likely be $1.66 billion this year and $1.72 billion in 2018.
Fiscal year: December. Earnings per share: 2018 est./$0.72…2017 est./–$0.40…2016/–$0.83.
Daniel M. Miller is executive vice president of Gabelli Funds and portfolio manager of the $150 million Gabelli Focus Five Fund (GWSIX), Rye, New York. Gabelli.com
