McGrath Cuts Revenue Outlook To $945 Million–$960 Million As Customers' Big Projects Run Late
Slower completion of large construction jobs cut modular new-equipment sales, while test-equipment rentals hit a 20-year utilization high.
McGrath RentCorp, which rents modular buildings, portable storage containers and electronic test equipment, lowered its 2026 revenue forecast to $945 million to $960 million on Wednesday's third-quarter earnings call. CEO Phil Hawkins and CFO Keith Pratt said large customer construction projects are taking longer to finish, which cut sales of new modular equipment.
Delays on customers' big jobs
Asked on the call why new modular sales fell short, a McGrath executive said the company had a healthy backlog at mid-year but that contracted projects are taking longer to reach completion. That, he said, is the "root cause" of the lower fourth-quarter outlook for that business.
He described the delays as "really issues with a customer" and said there was "nothing on our subplan." Pointing to the slowdown in nonresidential construction and higher interest rates, he cited customers struggling with permitting, site readiness and lining up subcontractors.
Another analyst asked whether big-project customers are renting rather than buying. The executive said higher rates typically push some buyers toward leasing, but he would not attribute most of the shortfall to a market shift away from sales.
Mobile Modular sales revenue fell $5.3 million to $47.1 million in the quarter. Mobile Modular's total revenue slipped 1% to $180 million, while rental revenue grew 4%.
Test equipment carries the quarter
Total company revenue rose 7% to $275 million and adjusted EBITDA rose 10% to $106 million, Pratt said. Rental operations revenue rose 6%.
At TRS-RenTelco, which rents electronic test equipment, revenue climbed 23% and rental revenue 26% to $35 million. Quarter-end utilization of 71.9% was the highest in 20 years, Pratt said, as data center and AI-related demand built.
Enviroplex, the portable-classroom maker, lifted sales revenue to $25.7 million from $13.7 million. Hawkins said a second-quarter delay moved into the third quarter and projects were completed as planned.
More spending, same profit midpoint
McGrath now expects adjusted EBITDA of $365 million to $373 million, a narrower range with an unchanged midpoint. It raised gross rental equipment capital spending to $270 million to $290 million. Pratt said most of the increase is at TRS.
Year to date, rental equipment purchases reached $219 million against $92 million a year earlier. The company repurchased $34 million of shares, and net borrowings stood at $618 million, or 1.68 times adjusted EBITDA for the last 12 months.
On 2027, the executive said it is too early to say anything, that this part of the business is harder to forecast and that the company will be careful.
Management said it will report fourth-quarter results in late February.
Sources
- McGrath RentCorp GAAP EPS of $2.00 beats by $0.13, revenue of $82.9M misses by $190.35M (MGRC:NASDAQ) | Seeking Alpha — seekingalpha.com
- McGrath: Q3 Earnings Snapshot | 9news.com — Associated Press
- McGrath Announces Results for Third Quarter 2026 — businesswire.com
