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United Rentals (URI) Up 4% Since Earnings Report: Can It Continue?
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More than a month has gone by since the last earnings report for United Rentals, Inc. (URI - Free Report) . Shares have added about 4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.
Recent Earnings
United Rentals came up with better-than-expected results in the third quarter of 2017. Earnings and revenues also improved from the year-ago level buoyed by solid volume growth, record time utilization along with improved rental rates. Robust demand in the U.S. end markets and recovery in the Canadian market helped United Rentals post the solid numbers.
The company’s third-quarter 2017 adjusted earnings of $3.25 per share beat the Zacks Consensus Estimate of $3.00 by 8.3%. Earnings also increased 26% year over year.
Revenues
Total revenues of $1.77 billion surpassed the Zacks Consensus Estimate of $1.71 billion by 3.3%. Revenues increased 17.1% year over year.
Rental revenues were also up 16.2% from the year-ago quarter to $1.54 billion. Volume of equipment on rent increased 18.2% and rental rates inched up 0.1%.
Segment Discussion
General Rentals: Segment rental revenues increased 12.8% year over year to $1.24 billion. Segment equipment rentals’ gross profit increased 11.9% to $525 million. However, gross margin declined 40 basis points (bps) year over year.
Trench, Power and Pump: The company’s Trench, Power and Pump specialty segment's rental revenues increased 32.9% year over year to $299 million, primarily on a same-store basis. Segment equipment rentals gross profit rose 40.2% to $164 million and gross margin improved 280 bps on a year-over-year basis.
Time Utilization & Fleet Size
Time utilization increased 160 bps to 71.9% from the year-ago level, marking a record third quarter for the company.
The size of the rental fleet was $10.76 billion of original equipment cost (OEC) as of Sep 30, 2017 compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 46.3 months on an OEC-weighted basis as of Sep 30, 2017 compared with 45.2 months as of Dec 31, 2016.
Margins
Total equipment rentals gross margin expanded 60 bps year over year to 44.9%.
Adjusted EBITDA improved 17.7% year over year to $879 million and adjusted EBITDA margin increased 30 bps to 49.8% in the quarter.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $324 million as of Sep 30, 2017 compared with $312 million as of Dec 31, 2016.
In the quarter, the company generated $429 million of net cash from operating activities compared with $383 million in the year-earlier quarter.
2017 Guidance Updated
Fundamentally strong market and contributions from acquisitions encouraged the company to raise its 2017 guidance.
Total revenues are now expected in the range of $6.525-$6.625 billion, higher than the prior range of $6.25-$6.40 billion.
Adjusted EBITDA is projected between $3.10 billion and $3.15 billion compared with the prior expectation of $2.95-$3.025 billion.
Net rental capital expenditures after gross purchases are likely to be in the range of $1.25-$1.30 billion, higher than $1.05 billion to $1.15 billion expected earlier.
Net cash provided by operating activities is expected in the range of $2.275-$2.375 billion, more than $1.975 billion to $2.175 billion projected earlier.
Free cash flow is expected in the range of $925-$975 million, higher than $825-$925 million expected earlier.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
VGM Scores
At this time, the stock has an average Growth Score of C, though it is lagging a bit on the momentum front with an D. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions also looks promising. It comes with little surprise that the stock sports a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.
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United Rentals (URI) Up 4% Since Earnings Report: Can It Continue?
More than a month has gone by since the last earnings report for United Rentals, Inc. (URI - Free Report) . Shares have added about 4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.
Recent Earnings
United Rentals came up with better-than-expected results in the third quarter of 2017. Earnings and revenues also improved from the year-ago level buoyed by solid volume growth, record time utilization along with improved rental rates. Robust demand in the U.S. end markets and recovery in the Canadian market helped United Rentals post the solid numbers.
The company’s third-quarter 2017 adjusted earnings of $3.25 per share beat the Zacks Consensus Estimate of $3.00 by 8.3%. Earnings also increased 26% year over year.
Revenues
Total revenues of $1.77 billion surpassed the Zacks Consensus Estimate of $1.71 billion by 3.3%. Revenues increased 17.1% year over year.
Rental revenues were also up 16.2% from the year-ago quarter to $1.54 billion. Volume of equipment on rent increased 18.2% and rental rates inched up 0.1%.
Segment Discussion
General Rentals: Segment rental revenues increased 12.8% year over year to $1.24 billion. Segment equipment rentals’ gross profit increased 11.9% to $525 million. However, gross margin declined 40 basis points (bps) year over year.
Trench, Power and Pump: The company’s Trench, Power and Pump specialty segment's rental revenues increased 32.9% year over year to $299 million, primarily on a same-store basis. Segment equipment rentals gross profit rose 40.2% to $164 million and gross margin improved 280 bps on a year-over-year basis.
Time Utilization & Fleet Size
Time utilization increased 160 bps to 71.9% from the year-ago level, marking a record third quarter for the company.
The size of the rental fleet was $10.76 billion of original equipment cost (OEC) as of Sep 30, 2017 compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 46.3 months on an OEC-weighted basis as of Sep 30, 2017 compared with 45.2 months as of Dec 31, 2016.
Margins
Total equipment rentals gross margin expanded 60 bps year over year to 44.9%.
Adjusted EBITDA improved 17.7% year over year to $879 million and adjusted EBITDA margin increased 30 bps to 49.8% in the quarter.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $324 million as of Sep 30, 2017 compared with $312 million as of Dec 31, 2016.
In the quarter, the company generated $429 million of net cash from operating activities compared with $383 million in the year-earlier quarter.
2017 Guidance Updated
Fundamentally strong market and contributions from acquisitions encouraged the company to raise its 2017 guidance.
Total revenues are now expected in the range of $6.525-$6.625 billion, higher than the prior range of $6.25-$6.40 billion.
Adjusted EBITDA is projected between $3.10 billion and $3.15 billion compared with the prior expectation of $2.95-$3.025 billion.
Net rental capital expenditures after gross purchases are likely to be in the range of $1.25-$1.30 billion, higher than $1.05 billion to $1.15 billion expected earlier.
Net cash provided by operating activities is expected in the range of $2.275-$2.375 billion, more than $1.975 billion to $2.175 billion projected earlier.
Free cash flow is expected in the range of $925-$975 million, higher than $825-$925 million expected earlier.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
VGM Scores
At this time, the stock has an average Growth Score of C, though it is lagging a bit on the momentum front with an D. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions also looks promising. It comes with little surprise that the stock sports a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.