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United Rentals (URI) Down 3.7% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for United Rentals, Inc. (URI - Free Report) . Shares have lost about 3.7% in the past month, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is URI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
United Rentals’ fourth-quarter 2017 earnings were in line with the Zacks Consensus Estimate but increased from the prior-year quarter owing to changes in tax laws and higher rental revenues.
Adjusted earnings of $3.34 (excluding the benefit associated with the enacted tax reform) were in line with the Zacks Consensus Estimate. The bottom line, however, increased 25.1% year over year.
Revenues
Total revenues of $1.92 billion surpassed the Zacks Consensus Estimate of $1.88 billion. Revenues increased 26.3% year over year.
Rental revenues were also up 26.8% from the year-ago quarter to $1.65 billion. Volume of equipment on rent increased 28.7% and rental rates inched up 1.1%.
Margins
Total equipment rentals gross margin expanded 30 basis points (bps) year over year to 44.4%.
Adjusted EBITDA improved 26.4% year over year to $947 million and adjusted EBITDA margin increased 10 bps to 49.3% in the quarter.
Segment Discussion
General Rentals: Segment rental revenues increased 24.7% year over year to $1.4 billion. Segment equipment rentals’ gross profit rose 24.5% to $600 million. However, gross margin declined 10 bps year over year.
Trench, Power and Pump: Segmental rental revenues were up 38.7% year over year to $276 million, primarily on a same-store basis. While equipment rentals gross profit rose 45.6% to $131 million, gross margin improved 230 bps on a year-over-year basis.
Time Utilization & Fleet Size
Time utilization increased 70 bps to 70% from the year-ago level.
The size of the rental fleet was $11.5 billion of original equipment cost (OEC) as of Dec 31, 2017, compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 47 months on an OEC-weighted basis as of Dec 31, 2017 compared with 45.2 months as of Dec 31, 2016.
2017 Results
Adjusted earnings of $10.59 per share (excluding the benefit associated with the enacted tax reform) missed the Zacks Consensus Estimate of $10.60. The company reported net sales of $6.64 billion, up 15.3% year over year. The top line slightly surpassed the Zacks Consensus Estimate of $6.60 billion.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $352 million as of Dec 31, 2017 compared with $312 million as of Dec 31, 2016.
In the quarter, the company generated $2.2 billion of net cash from operating activities compared with $1.9 billion in the same period last year.
2018 Guidance
For 2018, total revenues are expected in the range of $7.3-$7.6 billion, higher than $6.64 billion reported in 2017.
Adjusted EBITDA is projected between $3.60 billion and $3.75 billion, higher than the prior-year adjusted EBITDA of $3.16 billion.
Net rental capital expenditures after gross purchases are anticipated in the range of $1.2-$1.35 billion.
Net cash provided by operating activities is expected in the range of $2.625-$2.825 billion, higher than $2.230 billion reported in 2017.
Free cash flow is expected in the range of $1.3-$1.4 billion, higher than $983 million reported in 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter. In the past month, the consensus estimate has shifted up by 8.8% due to these changes.
At this time, URI has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was also allocated a grade of B on the value side, putting it in the second 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.
Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise URI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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United Rentals (URI) Down 3.7% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for United Rentals, Inc. (URI - Free Report) . Shares have lost about 3.7% in the past month, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is URI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
United Rentals’ fourth-quarter 2017 earnings were in line with the Zacks Consensus Estimate but increased from the prior-year quarter owing to changes in tax laws and higher rental revenues.
Adjusted earnings of $3.34 (excluding the benefit associated with the enacted tax reform) were in line with the Zacks Consensus Estimate. The bottom line, however, increased 25.1% year over year.
Revenues
Total revenues of $1.92 billion surpassed the Zacks Consensus Estimate of $1.88 billion. Revenues increased 26.3% year over year.
Rental revenues were also up 26.8% from the year-ago quarter to $1.65 billion. Volume of equipment on rent increased 28.7% and rental rates inched up 1.1%.
Margins
Total equipment rentals gross margin expanded 30 basis points (bps) year over year to 44.4%.
Adjusted EBITDA improved 26.4% year over year to $947 million and adjusted EBITDA margin increased 10 bps to 49.3% in the quarter.
Segment Discussion
General Rentals: Segment rental revenues increased 24.7% year over year to $1.4 billion. Segment equipment rentals’ gross profit rose 24.5% to $600 million. However, gross margin declined 10 bps year over year.
Trench, Power and Pump: Segmental rental revenues were up 38.7% year over year to $276 million, primarily on a same-store basis. While equipment rentals gross profit rose 45.6% to $131 million, gross margin improved 230 bps on a year-over-year basis.
Time Utilization & Fleet Size
Time utilization increased 70 bps to 70% from the year-ago level.
The size of the rental fleet was $11.5 billion of original equipment cost (OEC) as of Dec 31, 2017, compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 47 months on an OEC-weighted basis as of Dec 31, 2017 compared with 45.2 months as of Dec 31, 2016.
2017 Results
Adjusted earnings of $10.59 per share (excluding the benefit associated with the enacted tax reform) missed the Zacks Consensus Estimate of $10.60. The company reported net sales of $6.64 billion, up 15.3% year over year. The top line slightly surpassed the Zacks Consensus Estimate of $6.60 billion.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $352 million as of Dec 31, 2017 compared with $312 million as of Dec 31, 2016.
In the quarter, the company generated $2.2 billion of net cash from operating activities compared with $1.9 billion in the same period last year.
2018 Guidance
For 2018, total revenues are expected in the range of $7.3-$7.6 billion, higher than $6.64 billion reported in 2017.
Adjusted EBITDA is projected between $3.60 billion and $3.75 billion, higher than the prior-year adjusted EBITDA of $3.16 billion.
Net rental capital expenditures after gross purchases are anticipated in the range of $1.2-$1.35 billion.
Net cash provided by operating activities is expected in the range of $2.625-$2.825 billion, higher than $2.230 billion reported in 2017.
Free cash flow is expected in the range of $1.3-$1.4 billion, higher than $983 million reported in 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter. In the past month, the consensus estimate has shifted up by 8.8% due to these changes.
United Rentals, Inc. Price and Consensus
United Rentals, Inc. Price and Consensus | United Rentals, Inc. Quote
VGM Scores
At this time, URI has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was also allocated a grade of B on the value side, putting it in the second 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.
Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise URI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.