Machinery provider H&E (NASDAQ: HEES) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 14% year on year to $319.5 million. Its non-GAAP profit of $0.03 per share was 95.5% below analysts’ consensus estimates.

Is now the time to buy H&E Equipment Services? Find out by accessing our full research report, it’s free.

Company Overview

Founded after recognizing a growth trend along the Mississippi River and opportunities developing in the earthmoving and construction equipment business, H&E (NASDAQ: HEES) offers machinery for companies to purchase or rent.

Sales Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, H&E Equipment Services grew its sales at a sluggish 2.1% compounded annual growth rate. This was below our standards and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. H&E Equipment Services’s annualized revenue growth of 6.4% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Equipment. Over the last two years, H&E Equipment Services’s Equipment revenue (rentals) averaged 99.9% year-on-year declines. This segment has lagged the company’s overall sales.

This quarter, H&E Equipment Services missed Wall Street’s estimates and reported a rather uninspiring 14% year-on-year revenue decline, generating $319.5 million of revenue.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

H&E Equipment Services has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, H&E Equipment Services’s operating margin rose by 1.7 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, H&E Equipment Services generated an operating profit margin of 1.8%, down 11.8 percentage points year on year. Since H&E Equipment Services’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

H&E Equipment Services’s weak 1.1% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

H&E Equipment Services’s two-year annual EPS declines of 16% were bad and lower than its 6.4% two-year revenue growth.

In Q1, H&E Equipment Services reported EPS at $0.03, down from $0.71 in the same quarter last year. This print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Key Takeaways from H&E Equipment Services’s Q1 Results

We struggled to find many positives in these results as its revenue and EPS missed significantly. Its EBITDA also fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $89.62 immediately following the results.

So should you invest in H&E Equipment Services right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.