Herc Holdings (HRI) shares are +40% YTD and recently with a strong move after earnings clearing 2021 highs. HRI also saw an unusual buy of 525 March $260 calls for $360,000, rare in a name that sees very little options activity.

Herc is one of the leading equipment rental suppliers with 397 locations in North America. Herc is a full-line equipment rental supplier offering a broad portfolio of equipment for rent. HRI also sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies. Its classic fleet includes aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction and lighting. Equipment rentals includes power generation, climate control, remediation and restoration, pump, trench shoring, studio and production equipment. The equipment rental industry is highly fragmented with few national competitors and many regional and local operators. The growth and financial health of the North American equipment rental industry is driven by a number of factors including economic trends, non-residential construction activity, capital investment in the industrial sector, repair, maintenance and overhaul spending, government spending and demand for construction and other rental equipment generally, including for remediation and re-building efforts related to natural disasters.

HRI has a $6B market cap and trades 14.2X Earnings, 6.6X EBITDA and 4X Book with a 1.25% yield. HRI revenues are seen rising 6-8% annually with 8-10% EBITDA growth, an attractive value delivering solid growth. Herch has less mega project risk and more macro upside from local versus peers. Herc trades at a steep valuation discount to peers. Herch has increased its specialty fleet CapEx this year to support share of wallet opportunities, as well as the incremental demand from mega projects and potential business with customers in newer end market verticals where Herc is capturing greater penetration.

The trends of rental over ownership, reshoring, manufacturing, fortifying North America’s infrastructure, modernizing the electrical grid, rapid growth in AI and data centers, and the move toward clean energy all represent significant future opportunities for Herc as a leading equipment rental company with a full suite of capabilities, products and best in class services.