McGrath RentCorp (MGRC) shares plummeted 6.94% in pre-market trading on Friday following the release of its third-quarter 2025 earnings report, which fell short of market expectations. The equipment rental company faced headwinds from uncertain market conditions and softer demand in key segments.
The company reported total revenues of $256 million for Q3 2025, a 4% decrease compared to the same period last year. Adjusted EBITDA fell 7% to $96.5 million, while net income declined 8% to $42.3 million. Diluted earnings per share dropped to $1.72 from $1.87 in the previous year, disappointing investors who were anticipating better results.
McGrath's core Mobile Modular segment, which represents a significant portion of the company's business, saw total revenues decrease by 5% to $181.5 million. The segment experienced lower fleet utilization, with average utilization dropping to 72.6% from 77.1% a year earlier. This decline was primarily attributed to softer demand conditions, particularly for smaller projects in the commercial sector.
Joseph F. Hanna, President and CEO of McGrath RentCorp, acknowledged the challenging environment during the earnings call, stating, "Despite challenges in the demand environment, our booked orders increased during the third quarter. This was encouraging and positive for our momentum entering the first quarter." However, the market's reaction suggests that investors were looking for more robust growth and immediate signs of recovery.
The company also highlighted persistent uncertain market conditions, with nonresidential construction indicators such as the Architectural Billing Index (ABI) remaining soft. These factors, combined with the impact of high interest rates on smaller projects, have created headwinds for McGrath's near-term growth prospects.
Despite the disappointing quarterly results, management remained optimistic about the company's long-term strategy, citing progress in regional expansion, services offerings, and recent acquisitions. The company also raised its full-year financial outlook, expecting total revenue between $935 million and $955 million, and adjusted EBITDA between $350 million and $357 million for fiscal 2025.
As McGrath RentCorp navigates through these market challenges, investors will be closely watching for signs of improvement in demand and utilization rates across its business segments in the coming quarters.
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