United Rentals

Company Description

United Rentals is an equipment rental company. It offers approximately 3,000 classes of equipment for rent to customers in construction & industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. The company's fleet of rental equipment includes general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts, earthmoving equipment, and material handling equipment.

Back to Back Surprises

URI has seen two large positive earnings surprises in a row. The September 2011 quarter saw a beat of 21% and the December 2011 quarter had a beat of more than 34% ahead of the Zacks Consensus Estimate. Those beats also translated into nice moves for the stock with shares appreciating 14% and 11% respectively.

Prior to the last two reports, the company did hit a rough patch when it reported three straight earnings misses. Oddly enough, only one of those three negative reports ended up sending the stock lower.

URI Reported Earnings

On January 26, 2012 the company reported revenue of $746 million up from $597 million in the year ago period. In addition, earnings per share came in at $0.81 up from $0.16 posted a year ago and $0.21 higher than the Zacks Consensus Estimate of $0.61.

Valuations

URI trades at a discount to the industry average on many metrics that aggressive growth investors key on. The forward PE discount is more than 50% of the industry average of 30x, as is the price to sales discount. The company trades at 1x sales while the industry average is 1.5x. The metric that stands out is the 25x price to book compared to the 1.7x - but this is clearly due to the rental nature of the business.

The Chart

A quick look at the chart shows what two straight large positive earnings surprises will do for a stock. A continuation of these large scale beats will likely drive the stock higher, just what aggressive growth stock investors want to see happen. URI is a Zacks #1 Rank (Strong Buy).

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

Read the full analyst report on URI