Herc (NYSE:HRI) versus GATX (NYSE:GATX) Financial Analysis

Herc (NYSE:HRI) and GATX (NYSE:GATX) are both mid-cap transportation companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, dividends, earnings and risk.

Profitability

This table compares Herc and GATX’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Herc	0.61%	20.77%	3.38%
GATX	19.13%	12.52%	2.49%

Volatility & Risk

Herc has a beta of 1.86, indicating that its stock price is 86% more volatile than the S&P 500. Comparatively, GATX has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Insider and Institutional Ownership

93.1% of Herc shares are held by institutional investors. Comparatively, 93.1% of GATX shares are held by institutional investors. 1.3% of Herc shares are held by company insiders. Comparatively, 2.2% of GATX shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Herc and GATX, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Herc	0	2	3	0	2.60
GATX	0	2	1	0	2.33

Herc currently has a consensus target price of $144.60, indicating a potential upside of 24.13%. GATX has a consensus target price of $167.6667, indicating a potential upside of 10.33%. Given Herc’s stronger consensus rating and higher probable upside, equities analysts clearly believe Herc is more favorable than GATX.

Earnings and Valuation

This table compares Herc and GATX”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Herc	$3.57 billion	1.09	$211.00 million	$0.86	135.45
GATX	$1.59 billion	3.41	$284.20 million	$8.74	17.39

GATX has lower revenue, but higher earnings than Herc. GATX is trading at a lower price-to-earnings ratio than Herc, indicating that it is currently the more affordable of the two stocks.

Dividends

Herc pays an annual dividend of $2.80 per share and has a dividend yield of 2.4%. GATX pays an annual dividend of $2.44 per share and has a dividend yield of 1.6%. Herc pays out 325.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. GATX pays out 27.9% of its earnings in the form of a dividend. Herc has increased its dividend for 2 consecutive years and GATX has increased its dividend for 15 consecutive years.

Summary

Herc beats GATX on 9 of the 17 factors compared between the two stocks.

About Herc

Herc Holdings Inc., together with its subsidiaries, operates as an equipment rental supplier. It rents aerial, earthmoving, material handling, trucks and trailers, air compressors, compaction, and lighting equipment, as well as generators, and safety supplies and expendables; and provides ProSolutions, an industry specific solution based services, such as pumping solutions, power generation, climate control, remediation and restoration, and studio and production equipment. The company also sells used equipment and contractor supplies, such as construction consumables, tools, small equipment, and safety supplies; provides repair, maintenance, equipment management, and safety training services, as well as offers ancillary services, such as equipment transport, rental protection, cleaning, refueling, and labor. It serves non-residential and residential construction, specialty trade, restoration, remediation and environment, and facility maintenance contractors; industrial manufacturing industries, including automotive and aerospace, power, metals and mining, agriculture, pulp, paper and wood, food and beverage, and refineries and petrochemical industries; infrastructure and government sectors; and commercial and retail service, hospitality, healthcare, recreation, entertainment production, and special event management customers through its sales team, industry catalogs, as well as through participation and sponsorship of industry events, trade shows, and Internet. As of December 31, 2017, it operated approximately 275 locations in the United States, Canada, China, the United Kingdom, Saudi Arabia, and Qatar. Herc Holdings Inc. is based in Bonita Springs, Florida.

About GATX

GATX Corporation, together its subsidiaries, operates as railcar leasing company in the United States, Canada, Mexico, Europe, and India. It operates through three segments: Rail North America, Rail International, and Portfolio Management. The company leases tank and freight railcars, and locomotives for petroleum, chemical, food/agriculture, and transportation industries. It also offers maintenance services, including the interior cleaning of railcars, routine maintenance and repair of car body and safety appliances, regulatory compliance works, wheelset replacements, interior blast and lining, exterior blast and painting, and car stenciling services. In addition, the company manufactures commercial aircraft jet engines and leases aircraft spare engines; and owns and manages tank containers that are leased to chemical, industrial gas, energy, food, cryogenic and pharmaceutical industries, and tank container operators, as well as provides tank container sourcing, remarketing, and inspection and maintenance services. As of December 31, 2023, it owned and operated a fleet of approximately 148,500 railcars; 493 four-axle and 30 six-axle locomotives; 399 aircraft spare engines; and 23,931 tank containers. GATX Corporation was founded in 1898 and is headquartered in Chicago, Illinois.