Custom Truck One Source’s third quarter was marked by strong performance in its rental business, which management credited to continued high demand in the transmission and distribution (T&D) end markets. CEO Ryan McMonagle highlighted record rental fleet utilization and increased fleet investments, stating, “We believe that we are in the early stages of what could be a once in a generation transmission demand super cycle.” Despite sales growth, the company’s results missed Wall Street’s revenue expectations, mainly due to delayed equipment deliveries and a strategic shift toward prioritizing fleet expansion over third-party sales.
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 2026 highlights:
- Revenue $495.2 million vs S&P analysts’ estimates of $515 million (2.7% year-on-year growth, 3.8% miss)
- Adjusted EBITDA $110.9 million vs analyst estimates of $104.5 million (22.4% margin, 6.2% beat)
- Revenue guidance The company reconfirmed its revenue guidance for the full year of $2.15 billion at the midpoint
- EBITDA guidance $453.8 million at the midpoint for the full year, above analyst estimates of $447.4 million
- Operating margin 7.7%, in line with the same quarter last year
- Backlog $341.9 million at quarter end, up 22.2% year on year
- Market capitalization $2.45 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is 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
- Michael Shlisky (DA Davidson) asked about the sustainability of high utilization rates and whether seasonal trends could lower them in Q4. CEO Ryan McMonagle explained that while some seasonal decline is typical, strong demand may limit this effect as customers seek to retain equipment.
- Manish (Cantor Fitzgerald) questioned the outlook for SER segment margins and pricing flexibility in 2027. CFO Christopher J. Eperjesy suggested low- to mid-50% margins are sustainable, with potential for further price increases if demand remains robust.
- Manish (Cantor Fitzgerald) also asked about the impact of infrastructure and telecom trends. McMonagle noted that while infrastructure-related equipment shows some growth, telecom remains a small contributor and has not yet generated significant uplift.
- Daniel (Oppenheimer & Co.) sought details on STEM segment backlog drivers and the effect of fleet investments on next year’s growth. McMonagle indicated that strong order conversion and continued investment in rental assets will drive mid-single digit revenue growth.
- Brian Brophy (Stifel) inquired about the duration and timing of large transmission projects. McMonagle responded that project visibility now extends several years out, reflecting a marked change from previous cycles.
Catalysts in upcoming quarters
In the coming quarters, our analysts will be watching (1) the pace at which delayed third-party sales are recognized and their impact on revenue, (2) whether record rental utilization and backlog levels can be maintained amid ongoing project activity, and (3) the effectiveness of new fleet investments in boosting future EBITDA and supporting deleveraging. We will also monitor cost management and how the company navigates regulatory and supply chain headwinds.
Custom Truck One Source currently trades at $10.75, up from $9.01 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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