The supply chain has seen underinvestment and aging infrastructure for over two decades. As a result, the U.S. infrastructure, both public and private, has slowly deteriorated.

More than 7% of bridges are structurally deficient, and there is a water main break every two minutes, resulting in billions of gallons of treated water lost daily.

Corporate assets are also aging, with the average age of assets at their oldest level in over 20 years.

The ratio of net to gross property, plant, and equipment (PP&E) has declined from nearly 59% in 2001 to currently 54%. It will take over $500 billion to bring asset values back to 2001 levels.

This lack of investment has constrained supply chain capacity and efficiency.

The pandemic exposed vulnerabilities as outdated infrastructure struggled to meet surging demand. It was a wake-up call for much-needed upgrades.

The $1.2 trillion Bipartisan Infrastructure Law aims to rebuild aging infrastructure across the United States.

This investment is expected to generate sustained demand for industries involved in next-generation infrastructure over the next 10 years.

Areas like construction, engineering, electric grid components, transportation manufacturing, and telecommunications are well-positioned.

Custom Truck One Source (CTOS) is a company that appears well-positioned to capitalize on the surge in infrastructure investments happening across the United States.

Just as suppliers of shovels thrived during the gold rush, Custom Truck is poised to benefit from the growing demand for infrastructure development equipment.

The company rents out and sells specialty trucks and equipment to industries critical to the nation’s infrastructure, such as electric utilities, telecommunications, railroads, and more.

One of its primary strengths is access to capital. As a publicly traded company, it has better access to financial resources than many of its smaller competitors.

This access to capital enables the company to invest in new equipment, expand its fleet, and support its long-term growth plans. This is particularly important in an industry where keeping up with the latest technology and maintaining a young fleet are crucial to success.

Custom Truck’s fleet consists of more than 10,000 units, with an average age of just 3.7 years, making it a reliable option for customers who demand high-quality, up-to-date equipment.

Another advantage is its integrated service model. Unlike smaller firms that may only focus on specific services, Custom Truck can offer a full suite of solutions to its clients.

This integrated approach allows the company to serve national accounts more efficiently, providing everything from equipment sales and rentals to aftermarket services.

Customers benefit from having a single source for all their equipment needs, saving time and money, and this convenience helps Custom Truck build long-term relationships.

The company’s geographic reach also sets it apart. Its size and national footprint allow it to cater to large clients across various industries.

Additionally, its ability to sell used equipment directly to customers instead of through auctions provides it with higher margins on used sales, further improving its profitability.

Looking forward, Custom Truck is well-positioned to benefit from favorable economic conditions, including the Infrastructure Investment and Jobs Act, which is expected to inject billions into infrastructure projects.

The company is also expected to see tailwinds from lower interest rates, which should ease some of the pressure from its debt load.

Custom Truck One Source is a company with solid growth prospects, competitive advantages, and a strong position in a booming infrastructure market.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

This analysis of Custom Truck One Source (CTOS)’s credit outlook is the same type of analysis that powers our macro research detailed in the member-exclusive FA Alpha Pulse.