McGrath RentCorp Q2 Revenue Drops 6% on Sales Slump, but Rental Operations Grow 6%
MGRC sits 20% above its 52-week low of $94.99.
Summary
McGrath RentCorp's Q2 revenue fell 6% to $221.1M as equipment sales slumped, but rental operations grew 6% and TRS-RenTelco pre-tax income jumped 60%. The company refinanced debt and bought back $27.2M in stock.
Key Events · Earnings and Guidance · MGRC
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Revenue Down 6% on Sales Slump
Total Q2 revenue fell to $221.1M from $235.6M a year ago, driven by a 34% drop in equipment sales to $46.4M. Rental operations grew 6% to $172.5M, partially offsetting the decline.
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Earnings Dip Despite Rental Strength
Net income fell 6% to $33.7M, with diluted EPS of $1.37 vs $1.46. TRS-RenTelco pre-tax income surged 60% to $12.8M, while Enviroplex contributed less than 1% of pre-tax income vs 10% last year.
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Balance Sheet Moves: Refinancing and Buybacks
The company entered a new $725M credit facility, paid off $60M in Series E senior notes, and repurchased 250,000 shares for $27.2M at an average price of $108.82 under a 10b5-1 plan.
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Acquisition Adds Modular Capacity
Acquired a regional modular space provider for $11.3M, adding $7.0M in rental equipment and $4.8M in goodwill, expanding Mobile Modular's Midwest presence.
Analysis · MGRC · Trade & Services
McGrath RentCorp's second quarter showed a tale of two businesses. Total revenue fell 6% to $221.1 million, dragged down by a 34% plunge in equipment sales. However, the core rental operations — the company's bread and butter — grew 6%, with TRS-RenTelco's electronic test equipment rental pre-tax income surging 60%. The company also strengthened its balance sheet by refinancing its credit facility to $725 million and paying off $60 million in senior notes. Share buybacks of $27.2 million signal management's confidence, but the sharp decline in sales and a 5% drop in diluted EPS to $1.37 warrant attention.
At the time of this filing, MGRC was trading at $114.21 on NASDAQ in the Trade & Services sector, with a market capitalization of approximately $2.9B. The 52-week trading range was $94.99 to $128.41. This filing was assessed with neutral market sentiment and an importance score of 7 out of 10.