Heavy equipment distributor Custom Truck One Source (NYSE: CTOS) announced better-than-expected revenue in Q2 CY2025, with sales up 20.9% year on year to $511.5 million. The company’s full-year revenue guidance of $2.02 billion at the midpoint came in 2.7% above analysts’ estimates. Its GAAP loss of $0.13 per share was significantly below analysts’ consensus estimates.

Is now the time to buy Custom Truck One Source? Find out by accessing our full research report, it’s free.

Company Overview

Inspired by a family gas station, Custom Truck One Source (NYSE: CTOS) is a distributor of trucks and heavy equipment.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, Custom Truck One Source’s 19.3% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Custom Truck One Source’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.1% over the last two years was well below its five-year trend.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Equipment Rental and Aftermarket Parts and Services, which are 33.3% and 7.4% of revenue. Over the last two years, Custom Truck One Source’s Equipment Rental revenue ( lifts, cranes, trucks) averaged 3.5% year-on-year declines. On the other hand, its Aftermarket Parts and Services revenue (maintenance and repair) averaged 1.2% growth.

This quarter, Custom Truck One Source reported robust year-on-year revenue growth of 20.9%, and its $511.5 million of revenue topped Wall Street estimates by 9.6%.

Looking ahead, sell-side analysts expect revenue to grow 7.4% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Custom Truck One Source was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.2% was weak for an industrials business.

On the plus side, Custom Truck One Source’s operating margin rose by 8 percentage points over the last five years, as its sales growth gave it immense operating leverage.

This quarter, Custom Truck One Source generated an operating margin profit margin of 5.5%, up 1.3 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Custom Truck One Source’s full-year earnings are still negative, it reduced its losses and improved its EPS by 30.2% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Sadly for Custom Truck One Source, its EPS declined by 65.9% annually over the last two years while its revenue grew by 4.1%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Custom Truck One Source’s earnings to better understand the drivers of its performance. While we mentioned earlier that Custom Truck One Source’s operating margin expanded this quarter, a two-year view shows its margin has declined by 3.2 percentage points. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, Custom Truck One Source reported EPS at negative $0.13, down from negative $0.10 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Custom Truck One Source’s full-year EPS of negative $0.16 will reach break even.

Key Takeaways from Custom Truck One Source’s Q2 Results

We liked that Custom Truck One Source beat analysts’ revenue and EBITDA expectations this quarter. Looking ahead, full-year EBITDA guidance also beat. Zooming out, we think this was a solid print. The stock remained flat at $5.71 immediately after reporting.

Custom Truck One Source had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.