Heavy equipment distributor Custom Truck One Source 
CTOS fell short of Wall Street expectations in Q4 CY2025, with a modest sales increase of 1.4% to $528.2 million. Additionally, the company’s annual revenue guidance of $2.06 billion at the midpoint was 1.9% below forecasts. However, its non-GAAP profit of $0.13 per share surpassed analysts’ predictions significantly.
Custom Truck One Source (CTOS) Q4 CY2025 Overview:
- Revenue: $528.2 million, compared to analyst projections of $581 million (1.4% YoY growth, 9.1% shortfall)
- Adjusted EPS: $0.13 versus expectations of $0.06 (considerable outperformance)
- Adjusted EBITDA: $120.7 million against forecasts of $115.8 million (22.9% margin, 4.2% over)
- EBITDA forecast for FY 2026: $422.5 million at midpoint, aligning with analyst predictions
- Operating Margin: 9.8%, decreased from 12.9% in the same quarter last year
- Backlog: $335.3 million at quarter end, down 9.1% YoY
- Market Capitalization: $1.28 billion
StockStory’s Analysis
Custom Truck One Source’s fourth quarter led to a negative market response, attributed to sales growth that fell below expectations. Management highlighted continued strength in the rental segment, boasting record utilization rates and ongoing demand in the transmission and distribution (T&D) sectors. CEO Ryan McMonagle noted that rental segment customer activity reached “the highest in nearly three years,” with peak fleet utilization nearing 84%. Nonetheless, there were challenges in equipment sales due to customers advancing purchases earlier in the year amid anticipated tariffs and some delayed deliveries.
Future Outlook
Despite the setbacks, management remains optimistic regarding sustained demand in key markets and plans to realign segment reporting for better operational clarity. The rental segment is expected to drive growth, supported by ongoing investments and new partnerships like the one with HyAV. CFO Christopher Eperjesy stated that lower maintenance capital expenditures and inventory levels should lead to increased free cash flow, positioning the business well for 2026.
Management Insights
The quarter’s results were primarily driven by strong rental activity and strategic investments, although timing and inventory issues impacted equipment sales. The rental division achieved nearly 84% utilization, indicating high demand and improved fleet management. The TES segment’s performance was affected by earlier-than-expected customer purchases and postponed deliveries. Despite a YoY backlog decline, new orders surged by 21%, indicating trends favoring local demand.
Staying Focused on Key Factors
Moving forward, Custom Truck One Source’s performance will hinge on robust rental demand, enhanced operational efficiency, and improved transparency from segment reporting. Management anticipates continued high demand in the rental segment and plans to maintain moderate fleet growth while ensuring a young average fleet age to optimize operations. Moreover, they aim to decrease capital spending and inventory, bolstering cash flow and enhancing flexibility.
Monitoring Future Catalysts
In the upcoming quarters, the StockStory team will keep an eye on (1) the progress in inventory and working capital management, (2) the effects of the HyAV partnership on TES growth, and (3) the transition to the new segment reporting structure. Successful execution of these strategies, along with sustained rental demand, will be critical to watch.
Currently, Custom Truck One Source shares are priced at $5.74, down from $6.38 prior to the earnings report. Is there investment potential in this stock? Explore our complete research report (available for free).
