Sunbelt Rentals — Q1 Fiscal 2027 Earnings Summary

Financial Performance

• Total revenue increased 11.2% year-over-year to $3,115 million.
• Rental revenue increased 12.5% year-over-year to $2,927 million.
• Operating income increased 15.9% year-over-year to $691 million, with an operating margin of 22.2% (up from 21.3%).
• Adjusted operating profit increased 13.8% year-over-year to $759 million, with an adjusted operating profit margin of 24.4% (up 60 basis points).
• Net income increased 17.4% year-over-year to $438 million.
• Earnings per share (EPS) increased 23.0% year-over-year to $1.07.
• Adjusted earnings per share increased 20.4% year-over-year to $1.18.
• Adjusted EBITDA increased 8.7% year-over-year to $1,315 million, with an adjusted EBITDA margin of 42.2% (down from 43.2%).
• Return on investment for the trailing twelve months ended July 31, 2026, was 14.6%, consistent with the prior year.
• Cash flow from operations was $840 million.
• Free cash flow was $70 million.
• Long-term debt was $8,006 million; net debt was $8,524 million; net leverage was 1.8x.
• Original cost of rental equipment was $20,102 million, increasing 6.0% year-over-year.
• Average fleet age was 52 months.

Guidance and Future Outlook

• Full-year fiscal 2027 total revenue growth guidance raised to 6% to 9% (prior: 4.5% to 7.5%).
• Full-year fiscal 2027 rental revenue growth guidance raised to 7% to 10% (prior: 5% to 8%).
• Full-year fiscal 2027 adjusted EBITDA guidance raised to $4.92 billion to $5.12 billion (prior: $4.85 billion to $5.05 billion).
• Full-year fiscal 2027 net rental equipment capital expenditures guidance raised to $2.4 billion to $2.8 billion (prior: $2.05 billion to $2.45 billion).
• Full-year fiscal 2027 gross rental capital expenditures guidance raised to $2.75 billion to $3.15 billion (prior: $2.45 billion to $2.85 billion).
• Management cited strong momentum, confidence in the supply and demand landscape, durability of structural growth, and a strong through-the-cycle free cash flow platform.

Business Segments and Product Lines

• North America General Tool segment rental revenue increased 7.4% to $1,648 million; dollar utilization was 47% (consistent with prior year).
• North America Specialty segment rental revenue increased 25.3% to $1,070 million; dollar utilization increased to 77% (from 74%).
• UK segment rental revenue decreased 1.4% to $209 million; dollar utilization increased to 54% (from 53%).
• The acquisition of Reliant Asset Management (Aries brand) contributed approximately 100 basis points to rental revenue growth and 300 basis points to North America Specialty segment growth.
• The FIFA World Cup contributed approximately 250 basis points to rental revenue growth.
• General Tool adjusted operating profit increased to $539 million with a margin of 30.9% (down from 31.5%).
• Specialty adjusted operating profit increased 24.3% to $373 million with a margin of 33.0% (consistent with prior year).
• UK adjusted operating profit margin increased 10 basis points to 8.3%.
• The company opened 13 greenfield locations and invested $669 million on two bolt-on acquisitions.

Market and Competitive Landscape

• Demand was observed across mega projects, energy, live events, industrial, and non-construction MRO end markets.
• Local non-residential construction markets showed stability and demand.
• Growth was geographically broad, with outsized growth from large and strategic customers.
• Small and medium-sized customer base also demonstrated rental revenue growth.

Risks and Challenges

• The press release lists standard forward-looking statement risks including competition, global economic conditions, inflation, interest rates, supply chain constraints, geopolitical risks, currency fluctuations, seasonality, personnel retention, acquisition integration, rental rate changes, construction/industrial market shifts, and regulatory changes.
• UK segment margin performance was impacted by higher fuel costs (General Tool) and strong relative growth of ancillary revenues (Specialty).

Management Commentary and Tone

• CEO Brendan Horgan expressed pride in the team's execution and the company's "customer-obsessed mindset."
• Management highlighted the company's "differentiated technology platform and leading scale" as drivers of growth.
• The tone was confident, citing "strong momentum throughout top-line and bottom-line performance" and a "year of strong performance" ahead.

Other Key Points

• The Board declared a quarterly cash dividend of $0.30 per share, payable October 2, 2026, marking a shift from a semi-annual to a quarterly distribution framework.
• The company completed the offering of $1.2 billion in senior notes ($450 million at 4.950% due 2030 and $750 million at 5.650% due 2036).
• The company repurchased $56 million of common stock during the quarter.
• The company paid $307 million in dividends during the quarter.
• Excess availability under the senior secured credit facility was $3,750 million.
• The company has a fleet of assets exceeding $20 billion and operates over 1,600 locations.