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United Rentals' (URI) Q4 Earnings to Gain From Neff Buyout

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United Rentals, Inc. (URI - Free Report) is scheduled to report fourth-quarter 2017 results on Jan 25, after market close.

Synergies from the Neff Corporation acquisition are expected to reflect in fourth-quarter 2017 earnings. The company completed the buyout for approximately $1.3 billion last October. The buyout will enhance the company’s earthmoving equipment capabilities and efficiencies of scale in key markets. As part of the deal, United Rentals acquired approximately $860 million worth of fleet based on original equipment cost and 69 branch facilities. The company expects revenues from Neff in the fourth quarter of about $110 million, and EBITDA at around $55 million from Neff alone.

Let’s delve deeper into other factors that are likely to affect the company’s Q4 earnings.

In the third quarter, the company posted positive rental rates after eight straight quarters of negative rates. We expect the fourth-quarter results to reflect positive rental rates as well. Factors such as strong organic growth led by improving end-market demand and the NES acquisition are likely to help the company see an improvement in rates.

Equipment Rentals, comprising about 86% of total revenues, is expected to get a boost in fourth quarter. The Zacks Consensus Estimate for Equipment Rentals revenues of $1.6 billion reflects sequential growth of 6.3% and year-over-year rise of 25.7%.

The consensus estimate for rental equipment sales is $143 million, indicating an increase of 5.9% from the prior quarter. Again, sales of new equipment are expected to increase 12.5% on a year-over-year basis. Contractor Supplies revenues will likely witness 6.8% growth and Service and Other revenues are expected to rise 18.3%.

Project XL initiatives, prudent investments in fleet, accretive acquisitions and robust market demand enhance United Rentals’ prospects.

Moreover, the company has been experiencing growing demand in its core construction and industrial sectors. Commercial construction has been strong of late. Upstream oil and gas is also gaining traction on improving macro conditions. Thus, demand for United Rentals’ products is expected to increase, thereby driving revenues in the to-be-reported quarter. Analysts polled by Zacks expect net sales of $1.88 billion in the said quarter, up 23.3% from the year-ago quarter.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for the fourth quarter and 2017 earnings has improved in the last 30 days. Estimates for the fourth quarter moved up 0.9% to $3.34. The consensus mark for 2017 depicts an increase of 4 cents to $10.60.

The current Zacks Consensus Estimate for the fourth quarter and fiscal 2017 reflects year-over-year growth of 25.1% and 22.5%, respectively.

United Rentals, Inc. Price and EPS Surprise

 

 

What Does the Zacks Model Unveil?

Our proven model shows that United Rentals is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

United Rentals has an Earnings ESP of +0.24% and a Zacks Rank #3, which makes us reasonably confident of an earnings beat. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks Worth a Look

Here are a few construction stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Potlatch Corporation (PCH - Free Report) has an Earnings ESP of +0.29% and boasts a Zacks Rank #1. The company is set to report quarterly results on Jan 29.

D.R. Horton, Inc. (DHI - Free Report) has an Earnings ESP of +4.77% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is set to report quarterly results on Jan 31.

Louisiana-Pacific Corporation (LPX - Free Report) has an Earnings ESP of +6.90% and a Zacks Rank #2. The company is expected to report quarterly results on Feb 2.

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