Ever wonder how your local construction company can afford those big earthmovers and cranes it uses all over town? The odds are it does not own them at all. It rents. A leader in sales and rental of the heavy equipment is headquartered in Baton Rouge.

H&E Equipment Services (NASDAQ: HEES) provides heavy construction and industrial equipment, dealing in industrial lift trucks, aerial platforms, cranes and earthmovers. It rents and sells new and used equipment and also provides repair and maintenance services. Customers include construction contractors, manufacturers, public utilities, municipalities, maintenance contractors and other large industrial concerns. The firm serves nearly 28,000 U.S. accounts.

H&E surprised the Street last week, when it reported Q3 EPS of 53 cents and revenues of $270.6 million. Analysts had been expecting 45 cents and $243.3 million. Management also guided FY07 revenues to $0.995-$1.0 billion ($944.12M consensus) and announced a $100 million stock repurchase program. The CEO noted that a recent mid-Atlantic acquisition was expected to generate" significant growth opportunities." HEES shares broke through 30-day/50-day moving average resistance on the news and has now begun to form a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy," three "buys" and one "hold." Analysts see a 17% growth rate, through the next year. The HEES P/E ratio (10.61), Price to Sales ratio (0.78), Price to Book ratio (2.55), Price to Cash Flow ratio (4.36), Sales Growth rate (32.58%), EPS Growth rate (17.78%), Return on Assets (7.94%), Return on Investment (12.87%) and Return on Equity (27.32%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 50% of the outstanding shares. Over the past 52 weeks, the stock has traded between $15 and $30.59. A stop-loss of $16.70 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.