赫克控股 (HRI) 2026财年第三季度业绩电话会：受超大型项目需求推动上调业绩指引

核心要点

• 尽管按设备原值（OEC）计算的平均机队规模增长不到2%，但设备租赁收入同比仍增长约12%。美元利用率提升了360个基点。
• 调整后EBITDA增长约9%，调整后EBITDA利润率扩大190个基点至44.2%。调整后净利润为1.31亿美元，即摊薄后每股收益3.91美元。
• 管理层将全年设备租赁收入指引的中值上调至45.13亿美元，将调整后EBITDA指引的中值上调至21.3亿美元，两者均较此前预期高出约2%。
• 净机队资本支出指引中值增加至约10.5亿美元。新增投资主要为与新赢得或扩大的巨型项目任务相关的专业设备。
• 按OEC计算，专业设备在总机队中的占比重回20%，高于一年前的17%，与公司收购前的结构一致。
• Aaron Birnbaum将于1月1日接任首席执行官，而Lawrence Silber将转任执行董事长，并继续参与战略规划与资本配置。

关键财务业绩

租赁收入增速与总收入增速之间的差距，反映出在上年同期大规模处置机队后设备销售额有所下降。设备销售减少也提高了租赁收入在整体业务中的比重，从而对合并调整后EBITDA利润率构成了支撑。

核心租赁盈利能力面临运营成本上升、一线激励薪酬以及燃料与运费通胀带来的压力。燃料、运费及相关辅助收入结构使REBITDA利润率下降了约100个基点，相比第二季度170个基点的影响有所改善。

业务与运营业绩

Herc Holdings表示，对H&E Equipment Services的整合在收购完成九个月后圆满结束。2026财年第三季度是两个对比时期均包含H&E的首个完整季度，使得合并后的底层业绩更加直观清晰。

该公司本季度按OEC新增机队资产约5.8亿美元，今年迄今新增约12亿美元。按OEC计算，机队处置总额约2亿美元，而2025财年第三季度为3.75亿美元（当时Herc正积极对其收购的机队进行调整）。

专业设备收入实现双位数增长。在定向投资、新增专业业务网点以及向扩大的客户群进行交叉销售的支撑下，按OEC计算，专业资产目前占总机队的20%。管理层表示，与通用租赁设备相比，这些资产能创造更高的美元利用率和利润率。

在大巨型项目（涵盖数据中心、基础设施、制造业和能源领域）的推动下，全国性大客户引领了业绩增长。本地市场活动保持稳定，基础设施、政府及维护需求抵消了对利率敏感的商业建筑市场的疲软。

引用Dodge的预测数据，管理层表示美国巨型项目开工额预计在2026财年达到近7230亿美元，2027财年达到约7760亿美元。以作为指定主要或次要供应商的项目计算，Herc长期目标是拿下巨型项目租赁机会20%的份额。管理层提醒称，实现这一目标尚需数年时间，预计不会在2027财年实现。

管理层业绩指引

管理层将约1.5亿美元的增量净机队资本支出解释为实际上对2027财年机队预算的前置提前使用。该批设备预计将于第四季度开始产生EBITDA，并在2027财年及以后贡献全年效益。

公司仍致力于在2027年底前将净杠杆率降至目标区间的上限。管理层表示，EBITDA增长将是去杠杆的主要动力，而自由现金流和财务灵活性依然是资本配置的优先考虑事项。

风险与关注点

• 管理层指出，过去一年的租赁定价未能完全赶上通货膨胀，特别是燃料和运输成本。
• 销售与服务车辆以及分支机构间机队调拨仍是较高燃料成本难以收回的领域。
• 本地市场保持稳定，但管理层预计商业建筑活动若要进一步回升，需要更有利的利率环境。
• 未来定价改善的步调部分取决于即期租赁市场的复苏情况。
• 强劲的巨型项目需求要求Herc在平衡机队利用率的同时，保持充足的设备可用性和服务能力。

分析师问答集锦

管理层预计，租赁收入增长与机队规模增长之间的较大差距将持续至2027财年上半年，随后在下半年开始走向常态化。公司强调，目前的机队扩充是与已明确的客户需求挂钩，而非投机性的市场复苏。

Herc针对H&E的协同效应目标稳步推进。管理层重申了9000万美元增量成本协同效应以及1.1亿至1.2亿美元增量收入协同效应的目标。2026财年收入协同效应的转化率正处于最初65%-70%预测区间的下限附近，随着分公司运营成熟，可能会向70%靠拢。

管理层表示，继承自H&E的合同定价将在三年内逐步统一。收购后不久，即期市场定价已整合入Herc的定价工具中，而合同客户的费率正逐步调整，以保护客户留存率。

美元利用率得益于专业设备占比重回机队的20%、时间利用率提升以及定价改善。管理层的初步目标是恢复至约42%的年化美元利用率水平，与收购前的水平一致。

展望2027财年，管理层预计上半年同比基数将更为有利。下半年的增长预计将更多地依赖增量机队投资。详细的2027财年机队资本支出指引计划于2月发布。

业绩电话会议完整文字实录

完整财报电话会议逐字稿

管理层陈述

Operator

Thank you for joining us, and welcome to Herc Holdings Third Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Leslie Hunziker, Investor Relations. Leslie, please go ahead.

Leslie Hunziker

Thank you, operator, and good morning, everyone. Today, we're reviewing our third quarter 2026 results with comments on operations and our financials, including our view of the industry and our strategic outlook. The prepared remarks will be followed by Q&A. Let me remind you that today's call will include forward-looking statements. These statements are based on the environment as we see it today and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, the factors identified in the press release, our Form 10-Q and our most recent annual report on Form 10-K as well as other filings with the SEC. In addition, we'll be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the conference call materials.

Finally, please mark your calendars to join our management meetings at BNP Paribas' Virtual Global Group Call on November 3, the Baird Global Industrials Conference in Chicago on November 10, Rothschild & Co Redburn's Virtual CEO Conference on December 1 and the Melius Research Conference in New York on December 9. This morning, I'm joined by Larry Silber, Chief Executive Officer; Aaron Birnbaum, President; and Mark Humphrey, Senior Vice President and Chief Financial Officer.

I'll now turn the call over to Larry.

Lawrence Silber

Thank you, Leslie, and good morning, everyone. Before we turn to the quarter, I want to take a moment to address the announcement we made yesterday. Leading this company has been an honor and a highlight of my career. And after more than a decade as CEO, I've decided the time is right to transition to Executive Chairman at the start of next year. I'm thrilled that Aaron Birnbaum will step in as Herc Rentals next Chief Executive Officer on January 1.

This transition reflects the strength of our succession planning and my complete confidence in Aaron and the entire leadership team. Aaron has been with Herc for more than 35 years. Over that time, he has served in key roles across branch operations, sales, regional field management and executive leadership, and he understands this business as well as anyone in the industry. As our Chief Operating Officer and most recently as President, Aaron has been instrumental in shaping our strategy and driving our operational excellence. There is no one better prepared to lead Herc into its next chapter.

In my role as Executive Chairman, I will remain actively engaged working closely with Aaron and the Board on strategy, capital allocation and continuing to build on the strong foundation we've established together. I could not be prouder of what this team has accomplished or more excited about where it's headed. And this quarter is a great example of why. The third quarter was an outstanding period for Herc Rentals, and it reflects the strategic positioning we've built over the past year. As a reminder, in 2025, we closed the largest acquisition in our industry's history. And just 9 months later, we completed the integration of H&E Equipment Services, which Aaron quarterbacked from start to finish.

That work is now firmly behind us, and it has positioned us with a stronger and larger sales force, expanded scale and increased fleet availability to capture a greater share of wallet across the robust mega project pipeline. The third quarter is our first full quarter of comparable year-over-year combined results, and the underlying performance is clear. Equipment rental revenue increased nearly 12% on an average OEC fleet growth of less than 2%. That relationship, strong revenue growth on modest fleet growth is the direct result of being good stewards of capital. We've managed our fleet assets tightly, aligned the right equipment to the right markets and driving meaningful improvement in fleet efficiency with dollar utilization up 360 basis points in the quarter. This is exactly the kind of disciplined execution that defines Team Herc.

Now turning to Slide 5. We continue to follow our proven playbook, executing against our long-term growth strategies. First, we are growing the core. Our top line growth continues to be led by national accounts, fueled by the robust mega project activity across data centers, infrastructure, manufacturing and energy. Our increased scale and broader fleet capacity allow us to take on more of these large complex projects and elevate our role with major contractors. Second, we are expanding specialty. Specialty revenues grew double digits year-over-year in the quarter, and specialty once again represents 20% of our total fleet at OEC, up from 17% a year ago.

Specialty is a higher margin, higher return category, and we continue to disproportionately invest here to support mega projects, our new specialty branches and the cross-selling opportunities our larger customer base provides. Third, we are elevating technology. As an industry leader, our proprietary ProControl platform remains a true differentiator, giving customers the insights and controls they need to track, measure and manage their fleet for a safer, more efficient job site. And finally, we continue to invest responsibly in our fleet to support highly visible customer demand while maintaining capital discipline and managing our balance sheet for the long term.

Now moving on to Slide 6. Our performance also reflects a culture built on accountability, collaboration and shared commitment to our customers. As our organization has grown, that culture has kept our teams aligned and focused on consistent execution. Above all, safety remains our first priority. Our responsibility is to ensure our people have the training, tools and well-maintained equipment to work safely and help our customers do the same. That commitment underpins everything we accomplish.

With that, let me turn it over to Aaron to walk you through our fleet performance and our operating initiatives. Aaron?

Aaron Birnbaum

Thank you, Larry, for your leadership and mentorship over the years. I am honored to step into the CEO role in January, and I look forward to continuing the great work we started together. I'm also excited to have the privilege of leading the best team in the industry. The expertise, resilience and dedication Team Herc brings to our branches and our customers' job sites every day are truly what sets us apart.

And in the third quarter, that dedication showed up in our results. Our expanded network, maturing specialty branches, broader fleet access and stronger sales force are working together to serve more customer needs. The investments and integration work of the past year are translating into more effective execution across the organization and contributing to the second half momentum we anticipated.

Turning to Slide 8. Our fleet management approach is about more than deciding what to buy and what to sell. It's about understanding customer requirements, coordinating equipment across our network and getting the most productive use from the capital we already have invested. Our larger footprint gives us more flexibility to meet those requirements. We could draw on our broader equipment base, coordinate fleet across nearby branches and support large projects without treating every new opportunity as a separate fleet purchase. That expert fleet management is central to the efficiency Larry highlighted.

At the same time, we are making targeted investments where customer demand supports attractive returns. We added approximately $580 million of fleet at original equipment cost in the third quarter or about $1.2 billion year-to-date supporting life cycle replacement, mega project demand and our expanding specialty offering. We also disposed of approximately $200 million of fleet at OEC versus $375 million in last year's third quarter. The lower level of dispositions reflect a different operating priority. In the third quarter of 2025, we were actively rightsizing and aligning the acquired fleet. Today, our focus is ongoing life cycle management and refining the mix to match demand. A key part of refining that mix is our specialty offering.

As Larry noted, specialty equipment now represents 20% of our total fleet at OEC. That matches our pre-acquisition mix. When we acquired H&E, which was weighted toward general rental equipment, our specialty share initially declined to 17%. Returning to 20% this quickly reflects our targeted investment in specialty equipment to meet customer demand and intentional cross-selling activities to achieve our revenue synergy goals. These assets generate higher dollar utilization and higher margins, but the value we bring goes beyond the equipment itself. Our specialty teams provide the expertise to help customers solve complex job site challenges, enabling us to address more of their needs and deepen those relationships.

We continue to direct investment towards specialty and mega project requirements while carefully managing general rental capacity in stable local markets. Ultimately, the goal is not simply a larger fleet. It's the right fleet deployed productively with returns guiding our decisions. On Slide 9, the demand environment continues to be bifurcated and our diversification continues to serve us well. Local market activity remains stable overall. Infrastructure, government and maintenance-related demand continue to help offset softness in interest rate-sensitive commercial construction. National accounts, meanwhile, continue to lead our expansion. Our increased scale matters here. With greater branch density and a broader specialty offering, our sales teams can serve more of the customers' requirements across multiple projects and locations and strengthen relationships with major contractors.

Our long-term diversification strategy remains focused on a balance of local and national accounts. The current strength of national account demand is an opportunity we are equipped to serve while maintaining the local presence and customer relationships that support resilience across the cycle. Slide 10 shows the breadth of that customer base. We serve contractors, industrial customers, infrastructure and government agencies, commercial facilities and customers with the event-driven requirements. Those end markets have different demand cycles, equipment needs and service expectations. Our advantage is combining that breadth with sector expertise. A manufacturing facility, a utility project and a data center may all need general rental equipment, but their specialty requirements and operating schedules can be very different.

Our sales professionals and product specialists work together to build the right solution for each customer. The larger specialty network gives those teams more to offer. It also creates opportunities to introduce specialty solutions to customers who previously rented only general rental equipment from us. That is how diversification translates into business development, more ways to serve existing customers and more entry points into new accounts and less dependence on any single market.

Turning to Slide 11. The external forecast provide context for the opportunities our teams are pursuing. Dodge's updated projection is for nearly $723 billion of U.S. mega project starts in 2026, well above the level we saw in 2025. For 2027, Dodge is currently reporting about $776 billion of mega project starts with trillions of dollars more still working through the planning stages. As we discussed last quarter, we are targeting a 20% share of the mega project rental opportunity over time, counting only our revenue from projects where Herc is a designated primary or secondary supplier. The pipeline we are pursuing continues to expand across project types and end markets. Our focus is converting those opportunities into rental activity through strategic project selection, coordinated fleet deployment and reliable execution for customers.

Turning to Slide 12. This is the progression we outlined at the beginning of the year. The third quarter demonstrates how that preparation is translating into performance. Revenue synergies were an increasing contributor in the quarter, consistent with the second half weighting we previously outlined. That momentum is a direct result of our operational progress. Our newer specialty locations are maturing. Our sales teams are successfully cross-selling the broader offering, and our larger network is enabling deeper penetration into national accounts.

Beyond the acquisition synergies, we continue to focus on operating efficiencies at our larger scale. The logistics transformation initiative we discussed last quarter is a multiyear effort to improve routing, process rigor, cost recovery and consistency across the network. Those priorities remain important, especially in an environment of elevated fuel and freight costs. As we move through the fourth quarter, our operating agenda is straightforward: serve the expanding project pipeline, maintain efficient fleet deployment and keep improving execution across the network. The team has done the work to build this platform. Now we're putting it to work for our customers and shareholders.

Mark will now take you through the financial results and our updated outlook. Mark?

W. Humphrey

Thanks, Aaron, and good morning, everyone. I'm on Slide 14 with a summary of our key financial metrics. Equipment rental revenue increased approximately 12% in the third quarter, reflecting growth in both our general rental and specialty solutions offerings, driven by higher mega project volume, pricing improvement and improved fleet mix. This is our first full quarter with H&E included in both reporting periods. Last year's third quarter was still an active integration period, including fleet realignment, sales territory reallocation and systems migration.

So this quarter's results reflect the operating benefits of that early work. Total revenue increased approximately 5% in the quarter. The difference between rental revenue growth and total revenue growth primarily reflects lower revenue from equipment sales following the elevated dispositions associated with fleet optimization last year. Adjusted EBITDA increased about 9% and adjusted EBITDA margin expanded 190 basis points to 44.2%. I want to distinguish the consolidated margin result from the performance of the rental business itself.

With equipment sales lower year-over-year, rental revenue represented a larger proportion of total revenue, which benefited the adjusted EBITDA margin. REBITDA, which measures contribution from our core rental business, excluding equipment sales, increased roughly 10% and REBITDA margin was 45.2%. While this was down 70 basis points year-over-year, the headline understates the underlying strength of the rental business. Higher rental volume, pricing improvement and H&E revenue and cost synergies all benefited margin.

However, this quarter, those benefits were more than offset by core operating cost inflation, higher field incentive compensation tied to operational outperformance, particularly in fleet efficiency and fuel and freight inflation. On fuel and freight, specifically, these pressures, including the related ancillary revenue mix effect accounted for approximately 100 basis points of year-over-year REBITDA margin pressure. That compares with 170 basis points of pressure in the second quarter. So even with diesel costs higher sequentially, we delivered significantly improved recovery quarter-over-quarter. And while we continue to focus on improving delivery economics and transportation efficiency across our network, including through the logistics transformation initiative Aaron discussed. Adjusted net income was $131 million or $3.91 per diluted share.

Turning to Slide 15. We generated $133 million of free cash flow through the first 9 months of the year. We ended the quarter with ample liquidity of $2.1 billion and net leverage of 3.9x, down from 3.95x at the end of June. We also paid our regular quarterly dividend of $0.70 per share. Our capital allocation priorities remain consistent: invest where we see attractive returns, maintain financial flexibility and reduce leverage as the earnings contribution from our larger platform builds.

That brings me to our updated outlook on Slide 16, which reflects the expanding mega project portfolio in front of us. You can see the new guidance ranges here. At the midpoint, we now expect full year equipment rental revenue of $4.513 billion and adjusted EBITDA of $2.13 billion, up about 2% from the previous guidance. We are also increasing our net fleet CapEx to approximately $1.05 billion at the midpoint, driven by an increase in gross purchases that will be partially funded by higher fleet dispositions. This additional investment is primarily for specialty equipment to support newly won or expanded mega project assignments in the fourth quarter. It is tied to identified customer requirements, not a speculative fleet build or an assumption of a broader market recovery.

These are multiyear projects and the equipment we add in the fourth quarter will be in place to serve customers for the entirety of 2027 and beyond. Because of this, we view this roughly $150 million of incremental net fleet CapEx as effectively being pulled forward from our 2027 fleet budget. These assets also help us maintain manageable time utilization and availability needed to deliver reliable service. We're balancing the productive use of our fleet with the capacity to respond to customers rather than maximizing utilization at the expense of availability.

Importantly, the updated guidance continues to reflect substantial fleet efficiency. At the new midpoint, we expect second half equipment rental revenue growth of approximately 14% on average OEC fleet growth of approximately 4%, culminating in full year pro forma rental revenue growth of about 8% on roughly 2% average OEC growth. We're generating meaningfully more revenue from our asset base while selectively adding equipment where customer demand supports attractive returns.

So what does this CapEx increase mean for our free cash flow and deleveraging path? First, our 2026 free cash flow guidance remains unchanged at $250 million to $350 million. Second, and more importantly, because this equipment is tied to immediate mega project demand, it will go on rent and begin contributing to EBITDA right away in the fourth quarter. But the real power of the investment is in 2027 and beyond when we capture the full year EBITDA benefit of these high-margin specialty assets.

As a reminder, growing EBITDA is the single most powerful lever we have for reducing our leverage ratio. By securing this fleet now for committed projects, we are rapidly growing the denominator of that ratio. This investment doesn't delay our deleveraging path, it actively supports it. It gives us a higher EBITDA baseline entering next year and will be evaluated as 2027 capital as we build out next year's fleet plan. Deleveraging is a top priority, and we remain focused on returning to the top of our targeted leverage range by the end of 2027. The bottom line, demand continues to exceed our expectations, and our team is capturing that opportunity through active asset management and targeted deployment. As a result, we're raising our earnings outlook and strengthening the setup for 2027.

Now let's open it up for questions. Operator?

Operator

[Operator Instructions] Your first question is from Rob Wertheimer with Melius Research.

分析师问答

Robert Wertheimer

Congratulations, Larry. So I think you kind of touched on some of the headwinds to margin in the quarter. I mean you have, obviously, the fuel and some other things. Do you think that you're getting as much rate as you need to offset natural inflation? And do you think that we see higher incrementals as you kind of roll through the next quarter with the full kind of entity operating as a unified whole?

W. Humphrey

Yes. I mean it's a great question. I think that, obviously, rate is always a focus. I think when we evaluated sort of Q3, it performed about where we thought it would. But at the same time, I would say that from a 1-year view, rate is not sort of at the same level as inflation, particularly in mind of the fuel and the freight impacts. But that's always a focus for us, and we'll continue to focus on that as we sort of round into 2027.

Operator

Your next question comes from the line of Tami Zakaria with JPMorgan.

Tami Zakaria

Very nice quarter. So I know it's probably a little too early, but as you think about next year, any preliminary thoughts on whether rental revenue growth can outpace OEC growth to the same degree we saw in 3Q and what you're expecting for 4Q?

W. Humphrey

Yes. I mean I think if you look at Q3, right, that was a 12% over a 2%. I think if you look at the midpoint, as I said, you're kind of looking at 16% at mid-point rev growth on fleet growth of 5%. I think some of that continues into the front half of next year, Tami, but begins to normalize a bit more as you get into 3Q and 4Q of 2027. I think I would say fleet efficiency is always our mantra. It will continue to be something that we focus on. And I think that in this environment, the good news is, is that the fleet adds aren't necessarily speculative. We sort of know what we're buying, and we know that, that fleet is going on rent, which certainly helps this fleet efficiency. And I think we'll continue to do that as we walk into 2027. .

Tami Zakaria

Understood. That's very helpful. And then quickly, could you remind us how much incremental synergies in terms of revenues and cost you have left or you are expecting in 2027.

W. Humphrey

Yes. I mean we said we were going to get $90 million incremental on the cost side and $110 million to $120 million incremental on the rev side. I would say, as we sit here today, both of those are on track. I have said that we will give sort of a full report out come February of sort of how both of those things performed. But I think the message today is both are on track.

Operator

Your next question comes from the line of Mig Dobre with Baird.

Mircea Dobre

Aaron and Larry, congrats to both of you. My first question is on dollar utilization. That looked quite good this quarter. And unless I'm wrong in my model here, I got to go back to 2022 to find a Q3 that looks similar to this one. So I guess my question, as we sort of think about especially the forward outlook, right, Q4, but even into 2027, how should we think about dollar utilization maybe relative to a strong year like 2022? Is it possible that we're going to see on a seasonally adjusted basis, obviously, but similar performances to what we have there? And what are some of the moving pieces that you'd encourage us to consider here in terms of what you can physically get in terms of physical utilization from the equipment relative to rental rates or mix or anything else?

Aaron Birnbaum

Mig, thank you. And I'll take that question. The input to dollar used for us in the quarter were definitely our specialty business getting back to 20% of our fleet, right? With the premium nature of that type of fleet and the returns you get, that really helped us get that dollar UT to that level in Q3. Timing was strong. That's the other input. I wouldn't call it a record, and we still have work to do on certain categories as we kind of invest in the fourth quarter and going into next year. But those are the 2 inputs.

Pricing was starting to improve as we went through the rest of the year. We really had to kind of get through the integration and start to harmonize our business in a lot of ways. And so those are the 3 inputs. When we look at where do we go from here, we're happy with where we were in Q3 with that dollar UT. We think that our first goal is to get back to where we were pre-acquisition, which is like a 42% annual run rate. And then we'll continue to build annually on top of that. The more you can get your specialty business as a part of your business, it's going to give some fuel to that overall dollar UT. And that's our mission as we go out beyond just '27.

Mircea Dobre

All right. That's helpful. My follow-up, since you brought up the mix and that specialty is now 20% of the overall OEC, I also heard you say that some of the increased CapEx is almost kind of like a pull forward relative to 2027. I understand you're not providing guidance today, but I'm sort of curious as to what the right general framework is to think about CapEx and frankly, to think about free cash flow here as well as we think about the path for delevering, hopefully by year-end 2027.

W. Humphrey

No, it's certainly a fair question, Mig. I think it will be a combination of those 2. I think in my prepared remarks, I mean, I think in order to delever coming out of '27 to the top end of that, EBITDA growth will be paramount in that. It doesn't mean we're turning our back on free cash flow. But we will provide the growth capital necessary to continue to support our customers. And with that, I think it's, first and foremost, EBITDA growth, free cash flow in terms of the mix to get you to the top end of that guide as we walk out of 2027.

Operator

Your next question comes from the line of Jerry Revich with Wells Fargo.

Jerry Revich

Larry, Aaron, congratulations. Larry, I was just looking back when you took over, the business was EPS breakeven, dollar UT was about 10 points lower. So congratulations on the fantastic improvement in the profile of the operations. I wanted to ask on the outlook for pricing that Aaron and Mark, you spoke to. So typically, time UT leads pricing, and it sounds like pricing for you folks improved over the course of the quarter. So is it fair to think about pricing accelerating into year 2 of the recovery as we typically see for your business? Or is there anything we need to keep in mind compared to that normal cyclical pattern where you folks had a time UT acceleration this year and pricing acceleration should hopefully follow.

Lawrence Silber

Yes. Jerry, thanks for the kind words. Much appreciated. And as you know, pricing has always been top of mind for me and for Herc since I got here, and we're focused on it. We are operating in a very rational and constructive pricing environment right now. Supply dynamics are healthy. Cost inflation, including fuel and freight is an incremental incentive to raise rate. However, the magnitude of the inflection will depend on the spot market recovery going forward.

Jerry Revich

Okay. And can I ask in terms of where you folks are delivering more equipment, the semi fab CapEx outlook is for roughly a doubling '27 versus '26. Can you just talk about the magnitude of deliveries that you've already made to these sites? They're well positioned relative to your footprint. So just curious what you folks are seeing in the planned delivery on to those sites over the next couple of quarters based on what your visibility looks like.

Aaron Birnbaum

Jerry, it sounds like you're specifically asking about chip plants. Is that right?

Jerry Revich

That's right. That's right. Yes, that's right. Given your footprint, that's exactly right.

Aaron Birnbaum

Yes. We feel like we're well positioned there. There was an initial wave, I guess, maybe it was 2021, 2022 with a lot of chip plant activity. And we didn't have the footprint we have today then. But we were able to secure a fair amount of activity from those plants that came online at that time. And now there's another wave, that's what you're referring to.

So yes, this is something we're monitoring. We feel like we're well positioned. Those are great projects. They have very long project time line. They last several years. And some of the ones we've seen in the news are extremely large projects. So we're excited about that. And I think it's helpful just for the overall diversification of the mega landscape that those big projects are coming out again in different parts of the U.S. So we feel like we're well positioned for that.

Operator

Your next question comes from the line of Ken Newman with KeyBanc Capital Markets.

Kenneth Newman

Larry, congrats on the transition and looking forward to working with you more, Aaron, going forward. First question for me. The operating leverage this quarter was a lot more impressive than I would have expected. I know you're not ready to talk about '27 guidance yet, but from a high-level perspective, is there a way to think about baseline EBITDA flow-through if the market dynamics continue to be this strong? I know there's lots of puts and takes on the synergy capture and what the mix of the fleet is doing, but 90% EBITDA flow-through, I think, is maybe the strongest I've ever seen. It seems like the next quarter is going to be even stronger potentially. Just trying to level set the expectations for next year in terms of how that could flow through.

W. Humphrey

Yes. I mean I think that obviously, from a prepared remarks perspective, Ken, tried to touch on that a little bit, right? Like the sort of benefit to the quarter was sort of a decrease in dispositions of fleet in that comp, right? I think that certainly begins to normalize as we work our way through 2027 into a more normalized comp as well. I think the way high level, 2027 plays out is front half comps are much more favorable than the back half comps. And then I think you think about the growth coming, Aaron talked about tighter time utilization in Q3 and anticipated into Q4. I think that carries through into the front half of the year and then the back half of the year is supported by incremental fleet growth as we work our way through 2027. So that kind of 5,000-foot view, Ken, is sort of how I would think about the overall sort of activity of '27.

Kenneth Newman

Understood. And then maybe just a quick one here. Solid work on offsetting the headwinds from higher transportation costs. I think you said it was about 100 basis points of headwind. If I remember correctly, I think you guys were looking for about 150 this quarter. Just -- sorry if I missed this, are you still expecting 100 basis points of margin headwind for the full year from delivery and ancillary costs?

W. Humphrey

I mean you're probably not too far off if 4Q behaves the way 3Q behaved, right? I mean we've done Yeoman's work on sort of the recovery on the refuel side of this, and that came through this quarter. The reality of that, though, is you've got more fuel revenue, which is sort of not necessarily accretive to your overall business margins, right? So you got a little bit of overhang there as this elevation of fuel comes through. We've recovered sort of the margin to pre-inflation. So Yeoman's work there.

The pieces of this that remain problematic are really the sales and service vehicles and sort of that interbranch transfer component, which has sort of got all of that same fuel increase running through it. So we'll continue to focus on all of those. Quite honestly, the biggest sort of go get is an incremental price and overall efficiency of the freight operation to sort of mitigate those factors. I think the other thing I would say, right, if this continues into 2027, you do get a comp break when you get to Q2 of 2027 because that's when this first elevated view started coming through. So even in the event of it continuing, we will get sort of the benefit of the work we've done as we comp into next year.

Operator

Your next question comes from the line of Kyle Menges of Citigroup.

Kyle Menges

Congrats, Larry and Aaron. I wanted to touch more on mega projects. Last quarter, you did up your target market share on mega projects. I'm curious how you're seeing that track as we progress through 2026. And you had a good slide on the pipeline of projects for 2027. I'm sure you're already having conversations with those customers now. Based on how those customer conversations are progressing, I'm curious if you would anticipate your mega project share to be higher next year versus this year?

Aaron Birnbaum

Yes, Kyle, thank you. And regarding our position in megas, it's been a good tailwind for us this year. We -- I think as we got through the middle of the year, it got stronger and stronger. We -- with that visibility and kind of fully integrating the H&E acquisition, we thought that we had hit the top end of our 15% share in the mega arena, and we wanted to move the needle, right, because we thought we had more capabilities and capacity. So we moved it to 20%. That will take us some time to get there. It won't happen in 2027.

We view it as a kind of a few year kind of journey, but our capabilities will help us get there. And when we look at the setup, now we're in the fourth quarter, the setup for next year, the pipeline is strong. We're getting more wins and it's partly the reason why we had to take the CapEx up in the fourth quarter to get us -- get some of that fleet in place for the beginning of the year start. And we view next year as robust and solid in the mega space as 2026. And I think our capabilities, our new scale are really the reasons that we're able to kind of move our position and strengthen it and ultimately, like you mentioned, get to 20% share in the mega project arena.

Kyle Menges

That's helpful, Aaron. And a follow-up on that. It looks like just from your slide deck, you are sticking to that long-term target of 60% local mix. In light of the strength in mega projects and today, you're below that mix. I guess I'd like to hear your thoughts on why that 60% local mix is still the right mix long term.

Aaron Birnbaum

Yes. In our opinion, we've always had -- I mean, since Larry became the CEO, we've had an urban market strategy. So that's how we've built out our network to get scale in the largest -- initially, it was the largest 50 markets. Now it's the largest 100 markets. There's parts of the local market that are attractive. The price point for rental is stronger than on the large customer side. We're just in a cycle right now where the big projects are swinging up and the local market is stable. And as we've been saying for the last few quarters, and that -- we know that cycle will change again.

So we want to be prepared for when that happens. The H&E acquisition was a local market play. It gave us the scale. And that's a big part of this rental industry and not something we want to take our eyes off of because diversification is the key. And we want to make sure we're in all those situations where we can be successful.

Operator

Your next question comes from the line of Neil Tyler with Rothschild & Co Redburn.

Neil Tyler

Just wanted to come back to the topic of synergies actually. And the component of the revenue synergies that you have targeted that relates to evening up the rate at the H&E customers. Can you talk a little bit around how that is progressing in what is an improving rate environment, whether that actually makes that more achievable or even potentially more difficult? And then, Mark, if you just remind us in terms of the flow-through on those revenue synergies, how you're thinking about that currently?

Aaron Birnbaum

Neil, it's Aaron. I'll take the first part of that. The -- as it relates to the synergies and rate and the acquisition, so we're really happy where our synergies have landed for the first 1.5 years since we closed on the transaction. Our teams have worked very, very hard, and it's been a great story. One piece is we were able to expand our specialty network. And the other piece is we're able to drive revenues with customers that typically wouldn't have rented those equipments from H&E at the time. So we really drove that synergy. And now we're going on into the subsequent year.

It's kind of a 3-year play revenue synergies is for us. When we purchased the business, the price point was lower than the Herc Rentals price point. So we view that in 2 pieces. One is the spot market, right, which is the local market, it's the transaction market that happens every day. We bolted that business on to our algorithm, pricing tools within a few months. And so that started to kind of match up with what Herc was typically charging for those type of transactions. And I think we got the benefit of the scale of the business, but also the market dynamics of a tightening utilization going out there. So that built some momentum for pricing opportunity.

The second piece that we mentioned, and I'll remind is that H&E did have some contract customers, call it, 30% of their business was contract customers. And we said it would take us 3 years to match those rates with those customers that Herc expected. We weren't going to go get it all at the same time. We wanted -- what was most important is holding on to those customers and driving our synergies and our product diversification into them and building strong relationships. So we view it as a taking 1/3 price lift over a 3-year period and 3 years, we would get there. And we've been doing that.

So the first year, we took that 1/3 piece, and it might not have been exactly the price we won on existing Herc customer, but we did move the needle. And now we're going into the second year. And I think that the time utilization, the health of the market is -- are tailwinds to helping us kind of achieve that goal. And we look towards next year as another year of kind of turning the needle a bit and becoming more sticky with the customers, so we have more opportunities to do that. So we have some work to do to kind of harmonize that piece of the business. We started doing that in the back half of this year. And then as we roll into next year, our pricing harmonization will improve, we believe.

W. Humphrey

And Neil, the second part of your question, the original assumption as the guide was laid out was somewhere in that 65% to 70% flow-through on revenue synergies. And I think that you're probably at the low end of that as we're sort of walking through 2026. I think as the branch optimization and all of those underlying branches mature, I think you get to something that's closer to 70% in the out year.

Operator

Your next question comes from the line of Steven Ramsey with Thompson Research Group.

Steven Ramsey

My congratulations to everyone. I wanted to hear a bit more on your positioning on mega projects. Do you find yourself more and more being a prime supplier versus a secondary as you move through this year or what you're bidding on that will hit next year? And are there any intentional strategic moves you're making on how you're positioned on these projects?

Aaron Birnbaum

Steven, it's a good question. We -- as we mentioned in the prepared remarks, when we talk about our position in mega projects, it's always about, hey, do we have a secondary or a primary position? Are we the first or second supplier with an agreement with the customer. We don't really measure the tertiary activity that's going on. And as we've gone through the last 12 months, our positioning has strengthened. I would say those are related to 2 issues. One is our strengthening position and relationship with large GCs. Those are the ones that are doing most of the projects. And then the H&E acquisition gave us the scale to build the confidence and the fleet to go move in quicker and the confidence that we can execute on those jobs. .

General contractors on mega projects and people in the industry know this, they want to make sure you can execute, right? They're not taking too many chances on an entity that can't provide the safety, can't provide the high-quality equipment and the technology and the response to the service that's required. So the more we position it of 1 or 2, the more we expect that we'll win more new opportunities. And having a strong national account team is really critical to that. Then you have to have the operational acumen to mobilize. When you're mobilizing this kind of fleet, it's an exercise, the fleet planning, the demand planning of what's going to be needed on the job and then the kind of the forward operating view on what needs to happen out there.

We have teams that we've put together over the last several years that, that's what they do. It's not something we had 5 years ago, but we have dedicated operations and sales teams that focus in this arena because it's the opportunity where we have the capabilities, and that's where we want to go find revenue opportunities for the company.

Steven Ramsey

Okay. That's helpful. And then on the specialty locations gaining momentum, are they at a point where you need more fleet on them to keep growing? Or is it more get operations more in line before adding fleet to those new locations? .

Lawrence Silber

Yes. Good question, Steve. This is Larry. Look, these specialty locations are ramping, these new 50 locations are ramping as we'd expect. But just like any business, as they mature, you continue to give them the ability to ramp and acquire fleet as they show that they've matured in terms of technical knowledge, in terms of customer reach and ability to achieve fleet efficiency. So we're not there yet in the vast majority of them, and there's ample opportunity in the future as they continue to mature in those markets to add more capital as they grow and they grow efficiently. .

Operator

Your next question comes from the line of Seth Weber with BNP Paribas.

Seth Weber

Sorry if I missed this. But Mark, in your prepared comments, you used the phrase pull forward on CapEx. So sorry if I missed this, but should we assume that CapEx for 2027 is going to be up at this point? Or I'm just trying to think about what that phrase pull forward means for next year.

W. Humphrey

Yes. No, fair question. I think what that really means is that we're sort of viewing that, call it, $150 million sort of at the midpoint as part of the 2027 CapEx. The beauty of that fleet is it now works for us of the entirety of the year. Generally speaking, you think about fleet adds and you divide by 2 to sort of think about the benefit you're getting from those fleet adds in any given year. So we're contemplating that fleet as part of the 2027 plan. Not ready to sort of publicize sort of the overall gross fleet CapEx yet for 2027. We're still working through all of that, as you would imagine. But come February, we'll provide that guide.

Seth Weber

Okay. And then just local markets being stable, I think that's been your message for a while now. I mean, are you still thinking that we need a decline in interest rates for that to turn more positive? Or do you think -- I'm just trying to think through like what could get the local markets to be better here in intermediate term.

Lawrence Silber

Yes. Look, absolutely. We believe that, that's a big key to what I would call continued development and growth above a stable market really requires that commercial market to accelerate and commercial market is not going to accelerate unless there is an appropriate interest rate sort of environment for that. It applies to the -- you got to look at the 10-year treasury and what's happening there, and that will impact where that market goes.

But look, we are firmly positioned in the local markets, particularly in the large, more densely populated areas. And once that turns around, we will participate certainly in an outsized way to achieve results and capture share in those markets.

Operator

We have reached the end of the Q&A session. I will now turn the call back to Leslie Hunziker for closing remarks.

Leslie Hunziker

Thank you for joining us on the call today. We certainly look forward to updating you on our progress in the quarters to come. Of course, if you have any further questions, please don't hesitate to reach out. Have a great day.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.