Custom Truck One Source’s third quarter results were met with a negative market reaction, as revenue came in below Wall Street’s expectations despite a nearly 8% year-over-year increase. Management attributed the results to continued solid demand from utility and transmission and distribution (T&D) markets, as well as strong execution in both Equipment Rental Solutions (ERS) and Truck and Equipment Sales (TES) segments. CEO Ryan McMonagle emphasized that “steady business activity and strong intra-quarter order flow continue to reinforce our optimism about achieving our expected growth targets in 2025.” The company also pointed to rental fleet utilization rates reaching their highest level in two years and highlighted strategic investments in rental fleet capacity to meet ongoing demand.
Is now the time to buy CTOS? Find out in our full research report (it’s free for active Edge members).
Custom Truck One Source (CTOS) Q3 CY2025 Highlights:
- Revenue: $482.1 million vs analyst estimates of $489.5 million (7.8% year-on-year growth, 1.5% miss)
- Adjusted EPS: $0.01 vs analyst estimates of -$0.02 ($0.02 beat)
- Adjusted EBITDA: $95.96 million vs analyst estimates of $93.02 million (19.9% margin, 3.2% beat)
- The company reconfirmed its revenue guidance for the full year of $2.02 billion at the midpoint
- EBITDA guidance for the full year is $380 million at the midpoint, above analyst estimates of $374.6 million
- Operating Margin: 6.8%, up from 5.2% in the same quarter last year
- Backlog: $279.8 million at quarter end
- Market Capitalization: $1.33 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Custom Truck One Source’s Q3 Earnings Call
- Daniel Hultberg (Oppenheimer): Asked about visibility into 2026 momentum. CEO Ryan McMonagle cited strong utility demand and increased transmission activity, with recent fleet investments positioning the company for sustained growth next year.
- Justin Hauke (R.W. Baird): Inquired about the timing of inventory reduction and its impact on cash flow. CFO Christopher Eperjesy explained that most inventory reduction would occur in Q4, supporting free cash flow, although incremental rental investments mean full-year free cash flow will remain limited.
- Naim Kaplan (Deutsche Bank): Sought color on execution capabilities among utility T&D customers and TES order growth. McMonagle pointed to normalized project activity and a 30% increase in intra-quarter TES orders, especially from utility contractors.
- Brian Brophy (Stifel): Asked about the large transmission project pipeline and potential impact from project pauses like GreenLink. McMonagle responded that transmission demand remains strong, with ongoing projects supporting high utilization and no significant fourth-quarter impact from project delays.
- Michael Shlisky (D.A. Davidson): Questioned sector trends in telecom and rail, and implications of data center-driven power projects. McMonagle noted some growth in telecom and rail, but primary strength remains in transmission/distribution, with data center-related projects expected to sustain T&D demand.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will closely watch (1) the pace of rental fleet deployment and utilization in response to utility sector demand, (2) the company’s ability to manage inventory and deliver improved free cash flow as CapEx investments peak, and (3) evolving order flow and backlog trends in TES, particularly among local and regional customers. The trajectory of T&D project activity and macroeconomic conditions will also be important signposts for Custom Truck’s performance.
Custom Truck One Source currently trades at $5.89, down from $6.76 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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