Energy Capital Partners, through various entities, has sold a significant portion of its holdings in Custom Truck One Source, Inc. (NYSE:CTOS), a provider of specialized truck and heavy equipment solutions. The transaction involved the sale of 2,354,109 shares at prices ranging from $3.42 to $3.72, resulting in total proceeds of approximately $8.05 million.
The sale occurred on September 5, 2024, and was reported in a regulatory filing with the Securities and Exchange Commission on September 9, 2024. The average price per share for the bulk of the transaction was $3.42. These shares were offloaded in multiple transactions, and the entities involved have committed to providing further details regarding the number of shares sold at each price upon request.
Following the sale, the records show that ECP Cardinal Holdings, LP and NESCO Holdings, LP are the record holders of 4,088,426 and 19,296,453 shares of Common Stock, respectively. The shares are indirectly owned through a complex ownership structure involving several partnerships and limited liability companies, all managed by ECP ControlCo, LLC.
The managing members of ECP ControlCo, LLC, who collectively share the power to vote and dispose of the securities, include Douglas Kimmelman, Peter Labbat, Tyler Reeder, Rahman D'Argenio, Raoul Hughes, and Xavier Robert. Each of these managers may be deemed to share beneficial ownership of the securities due to their roles in the controlling entities, although they have individually disclaimed beneficial ownership of the securities.
Custom Truck One Source, Inc. is recognized in the industrial sector for its equipment rental and leasing services. This transaction marks a noteworthy adjustment in the investment portfolio of Energy Capital Partners and its affiliated entities in the company.
In other recent news, Custom Truck One Source experienced significant developments following its second-quarter 2024 earnings release. The company reported an EBITDA of $80.1 million, falling short of estimates from DA Davidson and the consensus. Despite this, sequential revenue growth and adjusted EBITDA growth were observed. However, due to market challenges such as supply chain disruptions and high-interest rates, the company revised its full-year guidance downward.
Financial services firm Baird adjusted its outlook on Custom Truck One Source, reducing the price target to $6.00 from the previous $7.00, while maintaining an Outperform rating. Baird's revised price target reflects a revision of estimates for CTOS, specifically within the Truck & Equipment Sales (TES) segment, due to a decrease in backlog levels.
Custom Truck One Source also expanded its credit facility from $750 million to $950 million, providing the company with enhanced financial flexibility to support its operations and strategic initiatives. Rahman D’Argenio, a board member and designee of Energy Capital Partners, resigned from the company, leading to a decrease in the board size from eleven to ten members.
Oppenheimer and DA Davidson also adjusted their price targets for Custom Truck One Source, influenced by the company's recent earnings release and challenges in its Transmission business due to project delays and supply-chain issues. Despite the current headwinds, the company remains optimistic about its future, projecting improvements in the latter half of the year and a focus on generating positive free cash flow for 2024.
InvestingPro Insights
In light of the recent transaction involving Energy Capital Partners and Custom Truck One Source, Inc. (NYSE:CTOS), it's important to analyze the company's financial health and market performance to understand the broader context. According to InvestingPro, CTOS is operating with a significant debt burden, which is a critical factor for investors to consider, especially in the industrial sector where capital expenditures can be high. Furthermore, the company's management has been actively engaging in share buybacks, which could be an attempt to signal confidence in the company's future or to improve financial ratios.
Delving into the real-time data from InvestingPro, we see a mixed financial landscape for CTOS. The company's market capitalization stands at a modest $807.84 million, which is relatively small in the industrial equipment rental space. The price-to-earnings (P/E) ratio is currently negative at -60.62, reflecting investor skepticism about future earnings potential. This is further underscored by a significant adjustment in the adjusted P/E ratio over the last twelve months to 595.99, indicative of the challenges the company faces. Additionally, the price to book ratio of 0.93 suggests that the stock might be undervalued based on the company’s assets, which could attract value investors.
Regarding the company's operational performance, CTOS has reported a gross profit margin of 23.12% over the last twelve months as of Q2 2024. This margin reflects the company's ability to control costs relative to sales, which is a vital aspect of profitability in the equipment rental industry. However, the company's revenue has experienced a decline of 7.4% in the most recent quarter, which could be a concern for revenue growth moving forward.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, including insights on the company's cash flow, analyst earnings revisions, and stock price trends. To explore these further, interested readers can find more tips on the InvestingPro platform.
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