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United Rentals (URI) Q2 Earnings & Revenues Top, Down Y/Y
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United Rentals, Inc.’s (URI - Free Report) shares declined 0.9% in the after-hours trading session on Jul 29, after the company reported second-quarter 2020 results. Although earnings and revenues topped the respective Zacks Consensus Estimate, the metrics declined on a year-over-year basis, thanks to the COVID-19 pandemic.
Inside the Headlines
Adjusted earnings of $3.68 per share topped the consensus estimate of $1.93 by 90.7%. However, the reported figure decreased 22.4% from the prior-year figure. Total revenues of $1.94 billion surpassed the consensus mark of $1.81 billion by 7% but declined 15.3% year over year.
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 16.2% from the year-ago quarter, mainly due to the pandemic’s impact.
Quarterly fleet productivity was also down 13.6% year over year due to lower rental volumes.
Used equipment sales generated $176 million of proceeds compared with $197 million a year ago. Adjusted gross margin of 46% contracted 320 basis points (bps) due to changes in the mix of equipment sold and pricing.
United Rentals, Inc. Price, Consensus and EPS Surprise
General Rentals: Segment equipment rentals’ revenues fell 17.8% year over year to $1.26 billion. Rental gross margin contracted 540 bps year over year to 33.4%, owing to increased depreciation expenses, as well as the COVID-19 pandemic’s impact on revenues.
Trench, Power and Pump/Specialty: Segmental rental revenues decreased 10.6% year over year to $387 million due to an 11.7% organic sales decline. Rental gross margin contracted 80 bps on a year-over-year basis to 46.8% due to higher operating costs and increased depreciation expenses.
Margins
The company’s total equipment rentals gross margin dropped 390 bps year over year to 36.5%. Adjusted EBITDA also dropped 16.2% from the prior-year quarter to $899 million. Adjusted EBITDA margin contracted 50 bps to 46.4%.
Balance Sheet
United Rentals had cash and cash equivalents of $127 million as of Jun 30, 2020 compared with $52 million at 2019-end. Total liquidity was $3.82 billion at quarter-end.
Net leverage ratio was 2.5 as of Jun 30, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $1.1 billion year to date. The company has no long-term debt maturities until 2025. It has repurchased $257 million of shares under the current $500-million repurchase program so far in 2020.
2020 Guidance Reissued
Total revenues are expected in the range of $8.05-$8.45 billion, indicating a decrease from $9.35 billion in 2019.
Adjusted EBITDA is projected between $3.6 billion and $3.8 billion, suggesting a decline from $4.36 billion in 2019.
Net rental capital expenditures after gross purchases are projected in the range of $50-$150 million, implying a decline from $1.3 billion in 2019.
Net cash provided by operating activities is expected in the range of $2.25-$2.55 billion, pointing to a decline from $3.02 billion reported in 2019.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $2-$2.2 billion, which suggests an increase from $1.59 billion reported in 2019.
Matthew Flannery, chief executive officer of United Rentals, said, “We saw a steady recovery in volume beginning in mid-April, which gave us goodmomentum into the start of our busy season. While visibility is still limited, near-term indicators suggestthat the second half of 2020 may track to seasonal patterns in the majority of our markets.”
Masco’s three-five year expected EPS growth rate is projected at 10.2%.
Patrick’s earnings topped the consensus mark in three of the last four quarters, with the average surprise being 9.8%.
TopBuild’s earnings topped the consensus mark in all the last four quarters, with the average surprise being 8.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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United Rentals (URI) Q2 Earnings & Revenues Top, Down Y/Y
United Rentals, Inc.’s (URI - Free Report) shares declined 0.9% in the after-hours trading session on Jul 29, after the company reported second-quarter 2020 results. Although earnings and revenues topped the respective Zacks Consensus Estimate, the metrics declined on a year-over-year basis, thanks to the COVID-19 pandemic.
Inside the Headlines
Adjusted earnings of $3.68 per share topped the consensus estimate of $1.93 by 90.7%. However, the reported figure decreased 22.4% from the prior-year figure. Total revenues of $1.94 billion surpassed the consensus mark of $1.81 billion by 7% but declined 15.3% year over year.
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 16.2% from the year-ago quarter, mainly due to the pandemic’s impact.
Quarterly fleet productivity was also down 13.6% year over year due to lower rental volumes.
Used equipment sales generated $176 million of proceeds compared with $197 million a year ago. Adjusted gross margin of 46% contracted 320 basis points (bps) due to changes in the mix of equipment sold and pricing.
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote
Segment Discussion
General Rentals: Segment equipment rentals’ revenues fell 17.8% year over year to $1.26 billion. Rental gross margin contracted 540 bps year over year to 33.4%, owing to increased depreciation expenses, as well as the COVID-19 pandemic’s impact on revenues.
Trench, Power and Pump/Specialty: Segmental rental revenues decreased 10.6% year over year to $387 million due to an 11.7% organic sales decline. Rental gross margin contracted 80 bps on a year-over-year basis to 46.8% due to higher operating costs and increased depreciation expenses.
Margins
The company’s total equipment rentals gross margin dropped 390 bps year over year to 36.5%. Adjusted EBITDA also dropped 16.2% from the prior-year quarter to $899 million. Adjusted EBITDA margin contracted 50 bps to 46.4%.
Balance Sheet
United Rentals had cash and cash equivalents of $127 million as of Jun 30, 2020 compared with $52 million at 2019-end. Total liquidity was $3.82 billion at quarter-end.
Net leverage ratio was 2.5 as of Jun 30, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $1.1 billion year to date. The company has no long-term debt maturities until 2025. It has repurchased $257 million of shares under the current $500-million repurchase program so far in 2020.
2020 Guidance Reissued
Total revenues are expected in the range of $8.05-$8.45 billion, indicating a decrease from $9.35 billion in 2019.
Adjusted EBITDA is projected between $3.6 billion and $3.8 billion, suggesting a decline from $4.36 billion in 2019.
Net rental capital expenditures after gross purchases are projected in the range of $50-$150 million, implying a decline from $1.3 billion in 2019.
Net cash provided by operating activities is expected in the range of $2.25-$2.55 billion, pointing to a decline from $3.02 billion reported in 2019.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $2-$2.2 billion, which suggests an increase from $1.59 billion reported in 2019.
Matthew Flannery, chief executive officer of United Rentals, said, “We saw a steady recovery in volume beginning in mid-April, which gave us goodmomentum into the start of our busy season. While visibility is still limited, near-term indicators suggestthat the second half of 2020 may track to seasonal patterns in the majority of our markets.”
Zacks Rank & Other Key Picks
United Rentals currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other top-ranked stocks in the Zacks Building Products – Miscellaneous industry include Masco Corporation (MAS - Free Report) , Patrick Industries Inc. (PATK - Free Report) and TopBuild Corp. (BLD - Free Report) , each sporting a Zacks Rank #1.
Masco’s three-five year expected EPS growth rate is projected at 10.2%.
Patrick’s earnings topped the consensus mark in three of the last four quarters, with the average surprise being 9.8%.
TopBuild’s earnings topped the consensus mark in all the last four quarters, with the average surprise being 8.7%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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