TRG | The Bottom Line – 9/18

In a note TRG published this week, we step back to see how rental/leasing companies are raising their outlooks across the board, with a focus on the capex raise. Why capex? Given we are closing in on 2027, capex is a signal for where next year’s demand is going. The growth in the market is supported by megaprojects and infrastructure (roads, utility, water, etc.) and these companies are scaled up and able to serve these effectively. The rental industry overall is quite rational (read – focused on pricing). So, our view is that rising and raising capex is a signal that demand is rising and more fleet supply is needed. rental companies’ combined capex was originally $1.3B higher than 2025 (to $7.3B). The combined capex outlook has been raised $1.5B from the original to $8.8B.

Separately, TRG spent time in Boston with the Construction Partners (ROAD) management team, and the consistent theme was despite ominous headlines, business is steady, backlogs continue to build, and margin goals outlined in ROAD 2030 remain on track. TRG this week also hosted a Fireside Chat with Core & Main (CNM) following their Q2 earnings last week, with the conversation on theme with the preceding topics. Management was constructive on activity in mega projects remaining robust, and municipal and state activity, which supports the bulk of CNM's water and wastewater infrastructure exposure, continues at a steady pace, suggesting public spending has yet to show any real cracks.

Taken together, rental's raised capex outlook, ROAD's building backlogs, and CNM's steady municipal demand all point to the same conclusion: infrastructure and megaproject activity is holding up even as the macro headlines stay noisy, and we'd expect that resilience to carry into how the market thinks about 2027.

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