H&E Equipment +10% as UBS upgrades to Buy on non-res construction strength

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H&E Equipment (HEES +10.6%) surges as much as 13% after UBS upgrades shares to Buy from Neutral with a $48 price target, raised from $45, saying the industrial equipment company's "transformation in the midst of a strong upcycle seems underappreciated."

With the recent sale of the crane distribution business, H&E has streamlined the business to focus on rental and is redeploying the proceeds from the asset sales into fleet growth, which should "drive a step function increase in EBITDA," UBS analyst Steven Fisher says.

The firm forecasts non-residential construction spending will rise 9.1% in 2022 after a 3.1% decline in 2021, and Fisher thinks this strength "will support strong utilization and rate growth over 2022-23."

"We don't think investors are adequately appreciating the transformation and strong backdrop for HEES over 2022-23," Fisher writes.

H&E Equipment recently reported better than expected Q4 earnings and revenues.