Commercial Equipment Rental and Leasing

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 8,500 companies in the US rent or lease commercial or industrial equipment and machinery directly to businesses. Major categories for rental or leasing revenue include miscellaneous types of commercial or industrial equipment (manufacturing, medical, audio/visual, theatrical and motion picture, modular/mobile buildings, energy/power generating); construction, mining, and forestry equipment; transportation equipment; and office equipment. Firms may also sell new or used equipment, supplies, and parts.

Capital-Intensive Operations

The commercial equipment rental and leasing industry is capital-intensive, and firms typically have significant investment in fleet holdings.

Variable Equipment Market Value

Fluctuations in market value for rental or leased equipment affect a firm’s fleet management effectiveness because companies rely on the sale of used equipment as a source of revenue.

Industry size & Structure

The average commercial equipment rental company operates out of a single location, employs 18-19 workers, and generates $7-8 million in annual revenue.

    • The commercial equipment and machinery rental industry consists of about 8,500 firms that employ 158,000 workers and generate $67 billion annually.
    • The construction, mining, and forestry sector accounts for about 37% of firms and 50% of industry revenue. The miscellaneous (manufacturing, medical, audio/visual, theatrical and motion picture, modular/mobile buildings, energy/power generating) sector accounts for 58% of firms and 46% of revenue. The office machinery and equipment sector accounts for 5% of firms and 4% of revenue.
    • The industry is concentrated; the top 50 companies account for about 55% of industry revenue.
    • Large companies include Aercap Group (commercial aircraft), United Rentals, and GATX. Large firms may have international operations.
                                    Industry Forecast
                                    Commercial Equipment Rental and Leasing Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Mar 21, 2023 - US Manufacturing Activity Contracts
                                    • US manufacturing activity - a demand indicator for commercial equipment rental and leasing - contracted in February 2022 for the fourth consecutive month, according to the Institute for Supply Management (ISM). The ISM’s Purchasing Managers Index (PMI) in February rose to 47.7%, up from 47.4% in January. A reading above 50% indicates manufacturing expansion. February’s New Orders Index rose 4.5 percentage points to 47%. The February Production Index fell 0.7 percentage points to 47.3%. Of the 18 manufacturing industries tracked by the ISM, only four reported growth in February: apparel, leather & allied products; transportation equipment; petroleum & coal products; and electrical equipment, appliances & components. Sectors reporting some of the most significant contractions in February included: printing & related support activities; paper products; wood products; textile mills; furniture products; nonmetallic mineral products; plastic & rubber products; food, beverage & tobacco products; chemical products; and primary metals.
                                    • In speaking at a JPMorgan Chase & Co. investor conference in March, airline executives said they were optimistic about travel demand for the rest of the year, according to The Wall Street Journal. Airline chiefs said consumer demand for travel was holding up, especially for leisure and trips that combine business with vacations. Delta Airlines’ CEO said business travel was about 80% recovered to pre-pandemic levels. Inflation has the potential to slow travel demand as airlines’ costs, including fuel and labor, push airfare higher. However, inflation eased slightly in February, rising 6% compared to a year earlier, which was down from the 6.4% year-over-year increase in January. Travel activity is a key demand driver for car rental and aircraft leasing.
                                    • The Dodge Momentum Index (DMI) increased 1.9% in February 2023 to 203.0 (2000=100), up from the revised January reading of 199.3. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the commercial planning component rose by 1.4%, and institutional increased by 2.9%. Commercial planning got a boost from an almost 20% rise in office planning and stronger data center project planning. In the institutional sector, education and healthcare planning saw gains, with research laboratories being a noted bright spot. Dodge’s associate director of forecasting said, “The continued elevation in the DMI should provide hope that construction activity will grow in 2024. Owners and developers tend to put projects into planning until well after economic conditions weaken. During the Great Recession, for example, the DMI did not substantially decline until 2009. Therefore, the anticipated mild economic growth in 2023 could cause the DMI to moderate over the year, but it is unlikely to fall below historical norms.”
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