Custom Truck One Source, Inc. (CTOS) Stock Analysis and Metrics

Custom Truck One Source

NYSE: CTOS

$10.86 ▲ +0.21 (+1.97%)

At close: Aug 11, 2026 · 11:21 AM UTC

Financial Ratios

Market Cap2.47 Bn

P/E115.17

P/S1.21

Div. Yield0.00

ROIC (Qtr)0.04

Total Debt (Qtr)1.66 Bn

Revenue Growth (1y) (Qtr)10.16

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About

Custom Truck One Source, Inc. provides a range of services and products through the rental and sale of specialty equipment, the rental and sale of aftermarket parts, and repair, maintenance, and customization of that equipment. The company serves customers in the electric utility transmission and distribution, telecommunications, rail, forestry, waste management and other infrastructure related industries across North America. Its core business centers on a large rental fleet of specialty equipment that supports installation, maintenance, repair and upgrade of critical assets such as power lines, telecom networks and rail systems.

Revenue is generated from three primary activities: equipment rentals, sales of new and used equipment, and aftermarket parts and services. Customers include utilities, contractors, telecom providers, rail operators and waste management firms that require specialized gear for projects ranging from line construction to routine maintenance.

The company operates through the following segments.

• Equipment Rental Solutions: This segment owns and manages a rental fleet of more than 10,400 units including bucket trucks, digger derricks, crane trucks, service trucks and heavy haul trailers that are rented to customers for short term or long term use.

• Truck and Equipment Sales: This segment sells new and used specialty equipment, often customized to meet specific customer needs, and generates revenue through outright sales of items such as bucket trucks, dump trucks and trailers.

• Aftermarket Parts and Services: This segment provides a broad range of parts, tools and accessories, offers test and repair services, and performs upfit and repair work on customer owned equipment.

Custom Truck One Source, Inc. holds a strong position as one of the largest specialty equipment rental providers in North America, competing with firms such as Herc Holdings, United Rentals and niche players focused on specific equipment types. Its competitive advantages include a young and well maintained fleet with an average age of approximately 2.9 years, a true one stop shop model that combines rentals, sales, parts and service, integrated production and customization capabilities that reduce lead times, a nationwide network of more than 40 locations supported by over 2,600 third party service partners, and long term relationships with a diversified customer base.

The company serves approximately 8,000 customers across its end markets, with the top 15 accounting for about 23.6 percent of total revenue and no single customer exceeding 4 percent of revenue. Its customer base includes electric utilities, telecom carriers, railroads, contractors and waste management companies that rely on its equipment and support services for infrastructure projects.

Investment Thesis

▲ Bull case

Custom Truck One Source is positioned to capture significant long-term growth from the secular tailwind of transmission and distribution (T&D) infrastructure investment, particularly as management highlighted that transmission mix is driving higher-margin rental yields and the company expects persistent demand throughout 2026 and 2027 based on ongoing customer conversations and bidding activity. The company’s rental fleet utilization reached 81.4% in Q1 FY26, up 370 basis points year-over-year, supported by a record $1.66 billion in quarter-end OEC on rent, which reflects disciplined fleet investment aligned with strong T&D demand. This combination of rising utilization, expanding fleet size on rent, and a shift toward higher-yield transmission equipment is directly improving on-rent yield to 38.9%, which remains in the targeted upper-30s to low-40% range and has room for further expansion as transmission projects scale. Management explicitly noted that price increases taken in December are flowing through yield metrics as contracts reprice, with price typically taking a full year to cycle through the fleet, indicating that the full benefit of recent pricing actions has not yet been realized and will continue to support margin expansion through the remainder of 2026. The company’s young fleet profile—averaging just under three years old—reduces maintenance CapEx needs while supporting reliability and customer satisfaction, creating a structural advantage in a market where equipment uptime is critical. Furthermore, the awarded Sourcewell cooperative purchasing contract provides a scalable, low-cost channel to access over 50,000 government and institutional agencies across North America, which management described as reinforcing customer trust and enabling expanded partnerships with local, state, and federal entities—a catalyst not heavily promoted in the earnings call but with meaningful potential to incrementally grow third-party rental and sales volumes without proportional increases in sales and marketing spend. This channel could accelerate adoption of CTOS’s equipment among municipal utilities and telecom providers, particularly as infrastructure spending from federal programs continues to flow into state and local projects.
The company is generating substantial operating leverage from its Specialty Equipment Rentals (SER) segment, which delivered adjusted EBITDA of $105 million in Q1 FY26, up 23% year-over-year, with margins expanding to 51.5%—an increase of over 415 basis points—driven by cost-out initiatives, productivity gains, and favorable mix shifts toward higher-yield transmission rentals. Despite this strong performance, management intentionally kept SER revenue guidance flat at $835 million to $870 million for FY26, citing conservatism and a focus on EBITDA growth rather than top-line assumptions, which suggests the market may be underestimating the segment’s capacity to exceed current revenue expectations if demand remains robust. The STEM segment also showed resilience, with third-party revenue up 5% year-over-year to $268 million and aftermarket parts and service revenue growing nearly 17%, indicating strength beyond new equipment sales and reflecting the durability of the installed base and customer reliance on CTOS for ongoing support. Management highlighted that gross margin expansion in STEM was driven by significant cost-out and productivity improvements, with normalized margins now expected to trend toward 16–17%, up from historical guidance of 15–18%, signaling sustained profitability improvements independent of volume growth. Critically, the $411 million sales order backlog at quarter-end—up $76 million or 23% sequentially—was heavily weighted toward local and regional customers in utility and forestry segments, with management noting that the “far majority” of this backlog will convert in 2026, minimizing near-term revenue timing risk and providing strong visibility into future performance. This backlog growth, combined with ongoing Q2 order strength above quarter-end levels, suggests that the current STEM revenue guidance of 3–10% third-party growth may be conservative if end-market demand continues to outperform expectations. Furthermore, the company’s net leverage ratio improved to slightly above four times, with over $190 million of additional availability under its ABL facility, providing financial flexibility to pursue strategic initiatives or weather volatility without compromising its deleveraging trajectory. The affirmation of FY26 revenue guidance at $2.005–$2.12 billion, coupled with raised EBITDA guidance of $415–$440 million, implies that the market is not fully pricing in the potential for incremental EBITDA expansion from operating leverage, mix improvement, and working capital unlock—particularly as management indicated that $30–$40 million of the projected $50+ million in levered free cash flow will come from working capital reductions, with inventory expected to fall below six months by year-end, creating a sustainable source of cash generation beyond temporary cost cuts.

Custom Truck One Source is positioned to capture significant long-term growth from the secular tailwind of transmission and distribution (T&D) infrastructure investment, particularly as management highlighted that transmission mix is driving higher-margin rental yields and the company expects persistent demand throughout 2026 and 2027 based on ongoing customer conversations and bidding activity. The company’s rental fleet utilization reached 81.4% in Q1 FY26, up 370 basis points year-over-year, supported by a record $1.66 billion in quarter-end OEC on rent, which reflects disciplined fleet investment aligned with strong T&D demand. This combination of rising utilization, expanding fleet size on rent, and a shift toward higher-yield transmission equipment is directly improving on-rent yield to 38.9%, which remains in the targeted upper-30s to low-40% range and has room for further expansion as transmission projects scale. Management explicitly noted that price increases taken in December are flowing through yield metrics as contracts reprice, with price typically taking a full year to cycle through the fleet, indicating that the full benefit of recent pricing actions has not yet been realized and will continue to support margin expansion through the remainder of 2026. The company’s young fleet profile—averaging just under three years old—reduces maintenance CapEx needs while supporting reliability and customer satisfaction, creating a structural advantage in a market where equipment uptime is critical. Furthermore, the awarded Sourcewell cooperative purchasing contract provides a scalable, low-cost channel to access over 50,000 government and institutional agencies across North America, which management described as reinforcing customer trust and enabling expanded partnerships with local, state, and federal entities—a catalyst not heavily promoted in the earnings call but with meaningful potential to incrementally grow third-party rental and sales volumes without proportional increases in sales and marketing spend. This channel could accelerate adoption of CTOS’s equipment among municipal utilities and telecom providers, particularly as infrastructure spending from federal programs continues to flow into state and local projects.
The company is generating substantial operating leverage from its Specialty Equipment Rentals (SER) segment, which delivered adjusted EBITDA of $105 million in Q1 FY26, up 23% year-over-year, with margins expanding to 51.5%—an increase of over 415 basis points—driven by cost-out initiatives, productivity gains, and favorable mix shifts toward higher-yield transmission rentals. Despite this strong performance, management intentionally kept SER revenue guidance flat at $835 million to $870 million for FY26, citing conservatism and a focus on EBITDA growth rather than top-line assumptions, which suggests the market may be underestimating the segment’s capacity to exceed current revenue expectations if demand remains robust. The STEM segment also showed resilience, with third-party revenue up 5% year-over-year to $268 million and aftermarket parts and service revenue growing nearly 17%, indicating strength beyond new equipment sales and reflecting the durability of the installed base and customer reliance on CTOS for ongoing support. Management highlighted that gross margin expansion in STEM was driven by significant cost-out and productivity improvements, with normalized margins now expected to trend toward 16–17%, up from historical guidance of 15–18%, signaling sustained profitability improvements independent of volume growth. Critically, the $411 million sales order backlog at quarter-end—up $76 million or 23% sequentially—was heavily weighted toward local and regional customers in utility and forestry segments, with management noting that the “far majority” of this backlog will convert in 2026, minimizing near-term revenue timing risk and providing strong visibility into future performance. This backlog growth, combined with ongoing Q2 order strength above quarter-end levels, suggests that the current STEM revenue guidance of 3–10% third-party growth may be conservative if end-market demand continues to outperform expectations. Furthermore, the company’s net leverage ratio improved to slightly above four times, with over $190 million of additional availability under its ABL facility, providing financial flexibility to pursue strategic initiatives or weather volatility without compromising its deleveraging trajectory. The affirmation of FY26 revenue guidance at $2.005–$2.12 billion, coupled with raised EBITDA guidance of $415–$440 million, implies that the market is not fully pricing in the potential for incremental EBITDA expansion from operating leverage, mix improvement, and working capital unlock—particularly as management indicated that $30–$40 million of the projected $50+ million in levered free cash flow will come from working capital reductions, with inventory expected to fall below six months by year-end, creating a sustainable source of cash generation beyond temporary cost cuts.

▼ Bear case

Custom Truck One Source faces meaningful near-term headwinds from the lapping of exceptionally strong year-ago comparisons in its STEM segment, particularly in Q2 FY26, where management acknowledged that the prior-year period included two months with third-party new sales above $110 million—the only such occurrences outside of December—making it a “pretty tough comp” that could mask underlying performance and lead to investor disappointment if sequential growth does not translate into meaningful year-over-year gains. This dynamic is compounded by the company’s decision to keep STEM third-party revenue guidance at a modest 3–10% range despite a 5% Q1 increase and growing backlog, suggesting that management may be anticipating a slowdown in new equipment sales momentum as the sector digests elevated levels of prior-year investment, especially given that overall STEM sales (including intersegment) are expected to be flat to slightly down due to reduced SER maintenance rental CapEx, which directly lowers demand for new trucks used in the rental fleet. Furthermore, while management emphasized stable pricing in new equipment and attributed gross margin gains to cost-out rather than price increases, the CFO explicitly stated that pricing remains “certainly more stable” than last year but still involves “some pressure,” indicating that margin expansion may not be sustainable if cost-saving initiatives plateau or if input costs (particularly chassis and transmission-related components) begin to rise amid robust sector demand, a risk management acknowledged by stating vigilance around these suppliers. The company’s reliance on floor plan financing for approximately 75–80% of its inventory means that working capital reductions—while expected to unlock over $100 million year-over-year—will yield only $20–$40 million in actual cash flow, significantly limiting the contribution of inventory drawdowns to free cash flow and potentially overstating the near-term impact of working capital improvements on deleveraging.
The company’s optimism around EPA 2027 readiness, while grounded in its young fleet age and strong OEM relationships, may be premature given management’s own admission that they are “continuing to watch how the mandate comes through and the final rulings from the EPA around warranty and other open questions,” signaling unresolved regulatory uncertainty that could disrupt customer buying patterns, increase compliance costs, or necessitate unexpected fleet modifications. Although CTOS highlights its inventory position (currently ~7.5 months on hand) as advantageous for absorbing EPA 2027-related changes, the expectation to reduce inventory below six months by year-end could conflict with the need to hold additional safety stock if new emissions standards create uncertainty around chassis compatibility or lead to supply chain delays, particularly as management noted ongoing vigilance around transmission-related suppliers. Moreover, while the Sourcewell contract expands access to government agencies, it does not guarantee incremental revenue, and the benefits of cooperative purchasing agreements often accrue more to the buyer (through reduced administrative burden and pricing) than the seller, especially in a competitive bidding environment where margins may be compressed to win volume. The company’s continued focus on deleveraging—targeting net leverage below four times by end-2026 and three times by 2027—relies heavily on sustained EBITDA growth and working capital conversion, but if T&D demand softens due to macroeconomic volatility, project delays, or a shift toward on-site generation at data centers (which management downplayed but acknowledged as something they “watch”), the rental business could face utilization pressure, undermining the thesis of persistent strength. Finally, the significant year-over-year adjusted EBITDA growth of 933% in Q1 FY26 is largely a function of an abnormally weak prior-year base (Q1 FY25), and while operating improvements are real, the magnitude of the reported increase risks creating unrealistic expectations for sustained triple-digit growth, setting the company up for potential perception gaps as comparisons normalize and the market begins to scrutinize the durability of margin expansion absent continued top-line acceleration.

Custom Truck One Source faces meaningful near-term headwinds from the lapping of exceptionally strong year-ago comparisons in its STEM segment, particularly in Q2 FY26, where management acknowledged that the prior-year period included two months with third-party new sales above $110 million—the only such occurrences outside of December—making it a “pretty tough comp” that could mask underlying performance and lead to investor disappointment if sequential growth does not translate into meaningful year-over-year gains. This dynamic is compounded by the company’s decision to keep STEM third-party revenue guidance at a modest 3–10% range despite a 5% Q1 increase and growing backlog, suggesting that management may be anticipating a slowdown in new equipment sales momentum as the sector digests elevated levels of prior-year investment, especially given that overall STEM sales (including intersegment) are expected to be flat to slightly down due to reduced SER maintenance rental CapEx, which directly lowers demand for new trucks used in the rental fleet. Furthermore, while management emphasized stable pricing in new equipment and attributed gross margin gains to cost-out rather than price increases, the CFO explicitly stated that pricing remains “certainly more stable” than last year but still involves “some pressure,” indicating that margin expansion may not be sustainable if cost-saving initiatives plateau or if input costs (particularly chassis and transmission-related components) begin to rise amid robust sector demand, a risk management acknowledged by stating vigilance around these suppliers. The company’s reliance on floor plan financing for approximately 75–80% of its inventory means that working capital reductions—while expected to unlock over $100 million year-over-year—will yield only $20–$40 million in actual cash flow, significantly limiting the contribution of inventory drawdowns to free cash flow and potentially overstating the near-term impact of working capital improvements on deleveraging.
The company’s optimism around EPA 2027 readiness, while grounded in its young fleet age and strong OEM relationships, may be premature given management’s own admission that they are “continuing to watch how the mandate comes through and the final rulings from the EPA around warranty and other open questions,” signaling unresolved regulatory uncertainty that could disrupt customer buying patterns, increase compliance costs, or necessitate unexpected fleet modifications. Although CTOS highlights its inventory position (currently ~7.5 months on hand) as advantageous for absorbing EPA 2027-related changes, the expectation to reduce inventory below six months by year-end could conflict with the need to hold additional safety stock if new emissions standards create uncertainty around chassis compatibility or lead to supply chain delays, particularly as management noted ongoing vigilance around transmission-related suppliers. Moreover, while the Sourcewell contract expands access to government agencies, it does not guarantee incremental revenue, and the benefits of cooperative purchasing agreements often accrue more to the buyer (through reduced administrative burden and pricing) than the seller, especially in a competitive bidding environment where margins may be compressed to win volume. The company’s continued focus on deleveraging—targeting net leverage below four times by end-2026 and three times by 2027—relies heavily on sustained EBITDA growth and working capital conversion, but if T&D demand softens due to macroeconomic volatility, project delays, or a shift toward on-site generation at data centers (which management downplayed but acknowledged as something they “watch”), the rental business could face utilization pressure, undermining the thesis of persistent strength. Finally, the significant year-over-year adjusted EBITDA growth of 933% in Q1 FY26 is largely a function of an abnormally weak prior-year base (Q1 FY25), and while operating improvements are real, the magnitude of the reported increase risks creating unrealistic expectations for sustained triple-digit growth, setting the company up for potential perception gaps as comparisons normalize and the market begins to scrutinize the durability of margin expansion absent continued top-line acceleration.

Segments Breakdown of Revenue (2025)

Peer Comparison

Companies in the Rental & Leasing Services

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	SUNB	Sunbelt Rentals Holdings, Inc.	33.95 Bn	29.02	3.24	8.13 Bn
2	AER	AerCap Holdings N.V.	23.48 Bn	5.90	2.62	-
3	UHAL	U-Haul Holding Co /NV/	14.45 Bn	50.71	1.77	2.36 Bn
4	R	Ryder System Inc	10.03 Bn	-5,016.39	0.78	7.46 Bn
5	GATX	Gatx Corp	6.35 Bn	27.03	3.10	-
6	HRI	Herc Holdings Inc	5.79 Bn	118.13	1.19	7.92 Bn
7	CAR	Avis Budget Group, Inc.	4.98 Bn	-7.46	0.42	6.02 Bn
8	WSC	WillScot Holdings Corp	4.20 Bn	-60.99	1.83	3.50 Bn

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About

Investment Thesis

Product and Service Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

Research Tools

Datasets

Plans

Developers

About

Investment Thesis

Product and Service Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

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