H&E Equipment Services (
should be on its way to new highs. This tiny industrial company
is firing on all cylinders, and the stock looks great, too.
HEES offers services to heavy construction and other major
industrial equipment businesses. Though operations are limited to
the U.S., company offices are spread across the country. This
geographical exposure is noteworthy because it allows HEES to
allocate its equipment between industrial and commercial
For example, commercial building was down a few years ago. In
fact, it still hasn't fully recovered from the 2007 bust. So the
company's commercial construction business slowed. However, due
to offices in
, their industrial construction business was able to pick up the
slack. Demand from petrochemical and oil industries continues to
be strong, and now accounts for more than half of total revenues.
Analysts are optimistic going forward. Upcoming data should show
a strong rebound in EPS from a year ago. Analysts expect 2012
earnings to increase to $1.02 from $0.26 in 2011. Growth should
continue in 2013, with the consensus calling for $1.23 EPS.
However, these numbers are highly subject to revision following
the fourth-quarter financial report that is due out next Monday.
The stock's current valuation is reasonable. If analysts are
remotely close with their estimates, the shares trade at 15.5
times the 2013 EPS. This multiple is on par with the industry,
but slightly lower than I'd expect considering the strong rebound
So with strong financial growth and a sensible valuation, the
chart should be equally as strong ... and it is.
The shares began to trade in a strong upward channel (blue lines)
in August. This trading pattern guided the stock higher from $10
More importantly, this positive trend remains intact. In fact,
now could be another great opportunity to buy the shares before
another new rally high. Along with finding support within the
channel (bottom blue line), the shares also have the support of
the 50-day moving average (orange line).
The 50-day moving average typically indicates where big investors
often make purchases. So it's a great place to take a position
because you should be buying ahead of a rally spurred by big
money buying the stock. Notice in the chart below how well the
price stabilized in October and December at the 50-day.
This chart shows the price of
shares along with important trend lines to monitor.
HEES is a strong buy so long as the shares stay above the
50-day and within the bullish channel.
Equities mentioned in this article: HEES
Positions held in companies mentioned above: