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United Rentals, Inc. (URI - Snapshot Report) reported second-quarter 2013 earnings of $1.12 per share, beating the Zacks Consensus Estimate of $1.01 and exceeding the prior-year quarter’s earnings of 66 cents per share.

On a reported basis, earnings were 78 cents per share compared with the prior-year quarter’s loss of 63 cents per share. Earnings in the reported quarter include RSC merger related costs along with restructuring and asset impairment charges.

Operational Update

Total revenue improved 22% year over year to $1.206 billion in the quarter. The year-over-year rise is mainly due to growth in the sales of rental equipment and an increase in equipment rentals. The results missed the Zacks Consensus Estimate of $1.228 billion.

Cost of sales increased to $735 million in the second quarter from $619 million in the year-ago quarter. Gross profit improved 26% year over year to $471 million. Consequently, gross margin expanded 240 basis points (bps) to 47% in the quarter.

Selling, general and administrative expenses went up 4% year over year to $152 million. Reported operating profit raised an impressive five-fold to $250 million. Adjusted operating profit went up 40% to $319 million in the quarter. Operating margin increased 350 bps to 26.5% in the quarter.

Adjusted EBITDA in the reported quarter improved 31% to $549 million from $418 million in the year-ago quarter. Time utilization increased 60 bps year over year to a record 67.9%. The size of the rental fleet was $7.7 billion as of Jun 30, 2013, compared with $7.23 billion as of Dec 31, 2012. The company also realized cost synergies of $60 million in the quarter from the RSC integration.

Segmental Performance

Revenues in the General Rentals segment increased 19% over year to $932 million in the reported quarter. Gross profit for the segment also increased 25% to $366 million in the second quarter from $293 million in the year-ago quarter.

Trench Safety, Power & HVAC segment’s revenues climbed 20% to $77 million in the quarter from $64 million in the year-ago quarter. Gross profit for the segment improved 20% to $36 million in the second quarter from $30 million in the year-ago quarter.

Financial Update

Cash and cash equivalents were $133 million as of Jun 30, 2013, compared with $106 million as of Dec 31, 2012. Long-term debt stood at $6.73 billion as of Jun 30, 2013, compared with $6.67 billion as of Dec 31, 2012.

Cash provided by operating activities was $469 million as of Jun 30, 2013, compared with $88 million a year ago. For the second quarter 2013, total rental and non-rental capital expenditures were $763 million, compared with $472 million in the prior-year quarter.

Outlook

United Rentals reiterated its adjusted EBITDA guidance for full year in the range of $2.25 billion - $2.35 billion. The company has reaffirmed its outlook for time utilization of around 68.0%. It has also retained the outlook of cost synergies on a run-rate basis in the band of $230 million-$250 million for fiscal 2013.

Greenwich, CT-based United Rentals is the largest equipment rental company in the world, with an integrated network of 830 rentals. The company offers for rent about 3,300 classes of equipment with a total original cost of $7.23 billion.

United Rentals currently retains a Zacks Rank #4 (Sell). Other companies in the building and construction industry with favorable Zacks Ranks are National Research Corp. (NRCIB - Snapshot Report), Aegion Corporation (AEGN - Snapshot Report) and USG Corporation (USG - Snapshot Report). While National Research holds a Zacks Rank #1 (Strong Buy), Aegion Corporation and USG Corporation carry a Zacks Rank #2 (Buy).
 

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