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Why Is United Rentals (URI) Down 10.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for United Rentals (URI - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is United Rentals due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
United Rentals Earnings & Revenue Beat, Lifts View
United Rentals, Inc. reported better-than-expected first-quarter 2022 results. Better fleet productivity on broad-based rental demand in construction and industrial verticals, higher total and rental revenues along with stronger pricing helped the company start 2022 on a stronger note.
URI also lifted its full-year guidance for total revenues, adjusted EBITDA and free cash flow, given customer sentiments and solid project activity.
With respect to 2022 guidance, Matthew Flannery, CEO of United Rentals, said, “Based on our visibility into the year, as well as leading industry indicators, we remain confident in our ability to leverage the current upcycle and adapt to any operating conditions.”
Inside the Headlines
Adjusted earnings of $5.73 per share topped the Zacks Consensus Estimate of $5.28 by 8.5%. The reported figure also increased 66.1% from the prior-year figure of $3.45 per share.
Total revenues of $2.52 billion surpassed the consensus mark of $2.47 billion by 2.1% and grew 22.7% year over year. This upside reflects broad-based solid momentum in activity across end-markets served.
Rental revenues increased 30.5% from the year-ago quarter to $2.18 billion. This marks a record first quarter, given a broad-based recovery of activity across end-markets served by the company as well as a higher rental fleet at original equipment cost ("OEC"). Fleet productivity was up 13% year over year backed by better fleet absorption.
Yet, used equipment sales decreased 21% from a year ago. Adjusted gross margin of 57.8% expanded 1,510 basis points (bps) due to higher pricing, which marked the sixth consecutive quarter of increase.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues grew 25.1% year over year to $1.59 billion. Rental gross margin expanded 380 bps year over year to 36.1%, courtesy of improved fixed cost absorption due to higher revenues.
Specialty (earlier known as Trench, Power and Pump): Segmental rental revenues increased 47.7% year over year to $582 million. Rentals gross margin grew 240 bps on a year-over-year basis to 44.5%, given improved fixed cost absorption.
Margins
The company’s total equipment rentals gross margin rose 370 bps year over year to 38.3%. Adjusted EBITDA also grew 30.5% from the prior-year quarter to $1,139 million. Adjusted EBITDA margin expanded 270 bps to 45.1% for the quarter, owing to higher margins from rental revenues and used equipment sales.
Balance Sheet
United Rentals had cash and cash equivalents of $101 million as of Mar 31, 2022, down from $144 million at 2021-end. Total liquidity was $3.006 billion at March-end. Long-term debt as of Mar 31, 2022 was $8.53 billion, down from $8.78 billion at 2021-end.
Cash from operating activities increased 16.9% year over year to $886 million for the quarter. Free cash flow fell 21.1% year over year to $572 million for the first quarter of 2022. This downside was mainly due to higher net rental capital expenditure.
2022 Guidance
Total revenues are expected in the range of $11.1-$11.5 billion versus $10.65-$11.05 billion projected earlier. This indicates an increase from $9.72 billion reported in 2021.
Adjusted EBITDA is projected between $5.2 billion and $5.4 billion compared with the prior projection of $4.95-$5.15 billion. The current projection indicates a jump from the year-ago figure of $4.41 billion.
Net rental capital expenditure after gross purchases is still projected within $1.85-$2.05 billion, indicating a decline from $2.03 billion in 2021, considering the mid-point of the guidance.
Net cash provided by operating activities is anticipated in the range of $3.7-$4.1 billion (compared with $3.5-$3.9 billion expected earlier), suggesting a rise from $3.69 billion in 2021.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $1.7-$1.9 billion compared with $1.5-$1.7 billion anticipated earlier. This suggests an increase from $1.53 billion reported in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 5.7% due to these changes.
VGM Scores
At this time, United Rentals has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, United Rentals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is United Rentals (URI) Down 10.6% Since Last Earnings Report?
A month has gone by since the last earnings report for United Rentals (URI - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is United Rentals due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
United Rentals Earnings & Revenue Beat, Lifts View
United Rentals, Inc. reported better-than-expected first-quarter 2022 results. Better fleet productivity on broad-based rental demand in construction and industrial verticals, higher total and rental revenues along with stronger pricing helped the company start 2022 on a stronger note.
URI also lifted its full-year guidance for total revenues, adjusted EBITDA and free cash flow, given customer sentiments and solid project activity.
With respect to 2022 guidance, Matthew Flannery, CEO of United Rentals, said, “Based on our visibility into the year, as well as leading industry indicators, we remain confident in our ability to leverage the current upcycle and adapt to any operating conditions.”
Inside the Headlines
Adjusted earnings of $5.73 per share topped the Zacks Consensus Estimate of $5.28 by 8.5%. The reported figure also increased 66.1% from the prior-year figure of $3.45 per share.
Total revenues of $2.52 billion surpassed the consensus mark of $2.47 billion by 2.1% and grew 22.7% year over year. This upside reflects broad-based solid momentum in activity across end-markets served.
Rental revenues increased 30.5% from the year-ago quarter to $2.18 billion. This marks a record first quarter, given a broad-based recovery of activity across end-markets served by the company as well as a higher rental fleet at original equipment cost ("OEC"). Fleet productivity was up 13% year over year backed by better fleet absorption.
Yet, used equipment sales decreased 21% from a year ago. Adjusted gross margin of 57.8% expanded 1,510 basis points (bps) due to higher pricing, which marked the sixth consecutive quarter of increase.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues grew 25.1% year over year to $1.59 billion. Rental gross margin expanded 380 bps year over year to 36.1%, courtesy of improved fixed cost absorption due to higher revenues.
Specialty (earlier known as Trench, Power and Pump): Segmental rental revenues increased 47.7% year over year to $582 million. Rentals gross margin grew 240 bps on a year-over-year basis to 44.5%, given improved fixed cost absorption.
Margins
The company’s total equipment rentals gross margin rose 370 bps year over year to 38.3%. Adjusted EBITDA also grew 30.5% from the prior-year quarter to $1,139 million. Adjusted EBITDA margin expanded 270 bps to 45.1% for the quarter, owing to higher margins from rental revenues and used equipment sales.
Balance Sheet
United Rentals had cash and cash equivalents of $101 million as of Mar 31, 2022, down from $144 million at 2021-end. Total liquidity was $3.006 billion at March-end. Long-term debt as of Mar 31, 2022 was $8.53 billion, down from $8.78 billion at 2021-end.
Cash from operating activities increased 16.9% year over year to $886 million for the quarter. Free cash flow fell 21.1% year over year to $572 million for the first quarter of 2022. This downside was mainly due to higher net rental capital expenditure.
2022 Guidance
Total revenues are expected in the range of $11.1-$11.5 billion versus $10.65-$11.05 billion projected earlier. This indicates an increase from $9.72 billion reported in 2021.
Adjusted EBITDA is projected between $5.2 billion and $5.4 billion compared with the prior projection of $4.95-$5.15 billion. The current projection indicates a jump from the year-ago figure of $4.41 billion.
Net rental capital expenditure after gross purchases is still projected within $1.85-$2.05 billion, indicating a decline from $2.03 billion in 2021, considering the mid-point of the guidance.
Net cash provided by operating activities is anticipated in the range of $3.7-$4.1 billion (compared with $3.5-$3.9 billion expected earlier), suggesting a rise from $3.69 billion in 2021.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $1.7-$1.9 billion compared with $1.5-$1.7 billion anticipated earlier. This suggests an increase from $1.53 billion reported in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 5.7% due to these changes.
VGM Scores
At this time, United Rentals has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, United Rentals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.