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Bull of the Day: United Rentals (URI)

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United Rentals, Inc. (URI - Free Report) is coming out of the slowdown due to the energy downturn. This Zacks Rank #1 (Strong Buy) is finally on the path to growing earnings again.

United Rentals is the largest rental company in the world. It has 895 rental locations in 49 states and 10 Canadian provinces serving the construction, industrial, utilities, municipalities and homeowner customers.

It rents out 3200 classes of equipment across all industries, at an original cost of $8.94 billion.

Online Sales Come to United Rentals

On July 26, United Rentals announced that its new online rental service, long in the planning stages, had actually launched.

On the site, you can browse, price, reserve and schedule equipment from any internet-enabled device, including your phone.

The new ordering service is available to all commercial and consumer renters.

Is the Energy Sell Off Over?

On July 20, United Rentals reported its second quarter results and beat the Zacks Consensus for the second straight quarter.

Earnings were $2.06 compared to the consensus of $1.84, for a 22 cent beat.

Rental revenue still decreased 1.6% year-over-year as the company is still dealing with the negative impacts of the energy downturn.

But, there is hope on the horizon. In May and June, month-over-month sequential rates increased 50 and 60 basis points, respectively. This was the first increases in sequential rates in 16 months.

United Rentals now doesn't see the 2016 rental rates as weak as it did before. It expects a smaller year-over-year decrease.

Strong areas included Trench Safety and Power & HVAC, which, combined increased 15% year-over-year, primarily on a same store basis.

Canada continues to be a challenge, especially in Alberta which is getting crushed due to the oil downturn.

In the United States, most of the energy equipment has been moved and absorbed, but there was not yet an upturn in the energy market.

But at least energy was no longer a drag on the business and that's a positive.

Analysts Raise Estimates

Given the better-than-expected quarterly results, the analysts have been raising 2016 and 2017 estimates.

7 estimates were raised for 2016 in the last 30 days pushing the Zacks Consensus Estimate up to $8.13 from $7.75.

8 have also moved higher for 2017.

Earnings growth is still minuscule, but at least the earnings are growing again.

Shares Are Cheap

United Rentals shares sold off over the last 2 years as oil prices plunged.

But they have since rebounded off the lows.

Even with the rebound, the shares are still cheap. They trade with a forward P/E of just 9.5 and have a PEG ratio of 0.7. A PEG ratio under 1.0 means a company has both value and growth, a rare combination.

For investors looking for a way to play the energy and construction rebound in the United States, United Rentals is one to keep on the short list.

[The author of this article owns shares of URI.]

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