On Wednesday, KeyBanc maintained its Sector Weight stock rating and price target for Herc Holdings (NYSE: NYSE:HRI), despite the company's first-quarter results surpassing consensus estimates. The firm highlighted that the unexpected performance was largely due to the stronger-than-anticipated outcomes from Cinelease, which has recovered from previous challenges, including a writers strike.
The analyst at KeyBanc noted that while the headline figures suggest a successful quarter, the underlying operational performance did not meet expectations. The contribution from Cinelease, Herc Holdings' business segment, was significant and not fully anticipated by investors, leading to a perceived overperformance. However, the core EBITDA and incremental margins were considered disappointing.
KeyBanc expressed concerns over Herc Holdings' future communications with investors, citing potential complications due to the pending sale of the Cinelease business. The firm anticipates that the accounting for this transaction could create confusion in the upcoming financial reports.
Given the current situation, KeyBanc advises caution, suggesting that there might be more advantageous investment opportunities within the market. The firm's stance remains neutral, opting to keep Herc Holdings at a Sector Weight rating as it monitors the company's progress amidst a moderating rental market environment.
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