Equipment rental company Herc Holdings (NYSE: HRI) fell short of the market’s revenue expectations in Q4 CY2025, but sales rose 27.1% year on year to $1.21 billion. The company’s full-year revenue guidance of $4.34 billion at the midpoint came in 14.2% below analysts’ estimates. Its non-GAAP profit of $2.07 per share was 11% above analysts’ consensus estimates.

Is now the time to buy Herc? Find out by accessing our full research report, it’s free.

“2025 was a pivotal year for Herc Rentals. In June, we completed the largest acquisition in our industry, bringing together two high‑quality equipment rental operators to create significant long‑term strategic and financial value,” said Larry Silber, chief executive officer.

Company Overview

Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE: HRI) provides equipment rental and related services to a wide range of industries.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Herc’s sales grew at an incredible 19.7% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Herc’s annualized revenue growth of 15.5% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Equipment rentals. Over the last two years, Herc’s Equipment rentals revenue (aerial, earthmoving, material handling) averaged 16.4% year-on-year growth.

This quarter, Herc generated an excellent 27.1% year-on-year revenue growth rate, but its $1.21 billion of revenue fell short of Wall Street’s high expectations.

Looking ahead, sell-side analysts expect revenue to grow 14.6% over the next 12 months, similar to its two-year rate. This projection is noteworthy and indicates the market is baking in success for its products and services.

Microsoft, Alphabet, Coca-Cola, Monster Beverage—all began as under-the-radar growth stories riding a massive trend. We’ve identified the next one: a profitable AI semiconductor play Wall Street is still overlooking. Go here for access to our full report.

Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Herc has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Herc’s operating margin decreased by 5.2 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Herc generated an operating margin profit margin of 20.7%, down 2.1 percentage points year on year. Since Herc’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Herc’s astounding 20.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Herc’s two-year annual EPS declines of 22.1% were bad and lower than its 15.5% two-year revenue growth.

We can take a deeper look into Herc’s earnings to better understand the drivers of its performance. A two-year view shows Herc has diluted its shareholders, growing its share count by 17.6%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, Herc reported adjusted EPS of $2.07, down from $3.58 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Herc’s full-year EPS of $7.46 to grow 13.8%.

Key Takeaways from Herc’s Q4 Results

It was good to see Herc beat analysts’ EPS expectations this quarter. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4% to $166 immediately after reporting.

Herc’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).