Equipment rental company Herc Holdings (NYSE: HRI) reported Q2 CY2026 results topping the market’s revenue expectations, with sales up 20.2% year on year to $1.20 billion. On the other hand, the company’s full-year revenue guidance of $4.43 billion at the midpoint came in 7.6% below analysts’ estimates. Its non-GAAP profit of $1.43 per share was 95% above analysts’ consensus estimates.

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“After successfully completing the H&E integration in the first quarter, the second quarter marked an important turning point for Herc Rentals, with our key metrics improving on a combined, comparable basis, both sequentially and year-over-year,” 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

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Herc’s 20.4% annualized revenue growth over the last five years was incredible. 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 19.7% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

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 19.7% year-on-year growth.

This quarter, Herc reported robust year-on-year revenue growth of 20.2%, and its $1.20 billion of revenue topped Wall Street estimates by 4.9%.

Looking ahead, sell-side analysts expect revenue to grow 3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

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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 17.1%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Herc’s operating margin decreased by 5.4 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 18.4%, up 9.8 percentage points year on year. The increase was solid, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

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 EPS grew at a weak 2% compounded annual growth rate over the last five years, lower than its 20.4% annualized revenue growth. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

Diving into the nuances of Herc’s earnings can give us a better understanding of its performance. As we mentioned earlier, Herc’s operating margin expanded this quarter but declined by 5.4 percentage points over the last five years. Its share count also grew by 10.2%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

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.

For Herc, its two-year annual EPS declines of 30.3% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Herc reported adjusted EPS of $1.43, down from $1.87 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 to grow 25.9% from $5.93 to $7.47.

Key Takeaways from Herc’s Q2 Results

It was good to see Herc beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its full-year revenue guidance missed. Overall, this print had some key positives. The stock traded up 1.9% to $162.75 immediately following the results.

Is Herc an attractive investment opportunity right now? 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).