Heavy equipment distributor Custom Truck One Source (NYSE:CTOS) fell short of the market’s revenue expectations in Q3 CY2025, but sales rose 7.8% year on year to $482.1 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $2.02 billion at the midpoint. Its GAAP loss of $0.03 per share was in line with analysts’ consensus estimates.
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Custom Truck One Source (CTOS) Q3 CY2025 Highlights:
- Revenue: $482.1 million vs analyst estimates of $489.5 million (7.8% year-on-year growth, 1.5% miss)
- EPS (GAAP): -$0.03 vs analyst estimates of -$0.02 (in line)
- Adjusted EBITDA: $95.96 million vs analyst estimates of $93.02 million (19.9% margin, 3.2% beat)
- The company reconfirmed its revenue guidance for the full year of $2.02 billion at the midpoint
- EBITDA guidance for the full year is $380 million at the midpoint, above analyst estimates of $374.6 million
- Operating Margin: 6.8%, up from 5.2% in the same quarter last year
- Free Cash Flow was -$42.17 million compared to -$96.77 million in the same quarter last year
- Backlog: $279.8 million at quarter end
- Market Capitalization: $1.50 billion
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 sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Custom Truck One Source’s sales grew at an excellent 13.5% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Custom Truck One Source’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.9% over the last two years was well below its five-year trend. 
We can dig further into the company’s revenue dynamics by analyzing its most important segments, Equipment Rental and Aftermarket Parts and Services, which are 35.1% and 7.8% 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 1.1% growth. 
This quarter, Custom Truck One Source’s revenue grew by 7.8% year on year to $482.1 million, missing Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 7.7% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates its newer products and services will catalyze better top-line performance.
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Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Custom Truck One Source was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.
On the plus side, Custom Truck One Source’s operating margin rose by 9.3 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q3, Custom Truck One Source generated an operating margin profit margin of 6.8%, up 1.6 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.
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 12.9% 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 56% annually over the last two years while its revenue grew by 2.9%. This tells us the company became less profitable on a per-share basis as it expanded.
Diving into the nuances of Custom Truck One Source’s earnings can give us a better understanding 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. 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 Q3, Custom Truck One Source reported EPS of negative $0.03, up from negative $0.07 in the same quarter last year. Despite growing year on 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 $0.12 will flip to positive $0.04.
Key Takeaways from Custom Truck One Source’s Q3 Results
It was good to see Custom Truck One Source provide full-year EBITDA guidance that slightly beat analysts’ expectations. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its EPS was in line and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 6.1% to $6.35 immediately after reporting.
Custom Truck One Source’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.