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Why Is United Rentals (URI) Up 35% Since Last Earnings Report?
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It has been about a month since the last earnings report for United Rentals (URI - Free Report) . Shares have added about 35% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Rentals 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 drivers.
United Rentals (URI - Free Report) Q3 Earnings & Revenues Top, View Up
United Rentals, Inc. reported third-quarter 2020 results. Earnings and revenues topped the respective Zacks Consensus Estimate. The company raised its full-year 2020 guidance for revenues, profitability and free cash flow, given sequential improvement in its performance.
Inside the Headlines
Adjusted earnings of $5.40 per share topped the consensus estimate of $4.33 by 24.7%. However, the reported figure decreased 9.4% from the prior-year figure. Total revenues of $2.19 billion surpassed the consensus mark of $2.14 billion by 2.3% but declined 12.1% year over year.
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 13.3% from the year-ago quarter, mainly due to the pandemic’s impacts. Nonetheless, rental volumes improved sequentially in each month in the quarter, consistent with normal seasonality. Quarterly fleet productivity was down 8% year over year due to lower rental volumes. That said, fleet productivity improved 560 bps sequentially, depicting better fleet absorption.
Used equipment sales generated $199 million of proceeds compared with $198 million a year ago. Adjusted gross margin of 44.2% contracted 180 bps due to changes in the mix of equipment sold and pricing.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues fell 15.3% year over year to $1.39 billion. Rental gross margin contracted 190 bps year over year to 39% owing to increased depreciation expenses and the COVID-19 pandemic’s impact on revenues.
Trench, Power and Pump or Specialty Rentals: Segmental rental revenues decreased 6.9% year over year to $470 million. Rental gross margin, however, expanded 110 bps on a year-over-year basis to 49.8% due to lower operating costs, partly offset by increased depreciation expenses.
Margins
The company’s total equipment rentals gross margin dropped 90 bps year over year. Adjusted EBITDA also dropped 10.4% from the prior-year quarter to $1.08 billion. Nonetheless, adjusted EBITDA margin expanded 90 bps to 49.4%. The improvement reflects the combined impact of the actions taken by the company to manage costs.
Balance Sheet
United Rentals had cash and cash equivalents of $174 million as of Sep 30, 2020 compared with $52 million at 2019-end. Total liquidity was $3.43 billion at quarter-end. The company’s free cash flow was $583 million for the third quarter, higher than $302 million a year ago.
Net leverage ratio was 2.4 as of Sep 30, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $1.499 billion year to date. It has repurchased $257 million of shares under the current $500-million repurchase program so far in 2020.
Lifts 2020 Guidance
Total revenues are expected in the range of $8.35-$8.45 billion (versus 8.05-$8.45 billion expected earlier), indicating a decrease from $9.35 billion in 2019.
Adjusted EBITDA is projected between $3.825 billion and $3.875 billion (versus $3.6-$3.8 billion expected earlier), suggesting a decline from $4.36 billion in 2019.
Net rental capital expenditures after gross purchases are projected in the range of $100-$150 million (versus $50-$150 million anticipated earlier), implying a decline from $1.3 billion in 2019.
Net cash provided by operating activities is expected in the range of $2.45-$2.55 billion (versus $2.25-$2.55 billion projected earlier), 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-$2.3 billion (versus $2-$2.2 billion of earlier expectation), which suggests an increase from $1.59 billion reported in 2019.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, United Rentals has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Outlook
United Rentals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is United Rentals (URI) Up 35% Since Last Earnings Report?
It has been about a month since the last earnings report for United Rentals (URI - Free Report) . Shares have added about 35% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Rentals 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 drivers.
United Rentals (URI - Free Report) Q3 Earnings & Revenues Top, View Up
United Rentals, Inc. reported third-quarter 2020 results. Earnings and revenues topped the respective Zacks Consensus Estimate. The company raised its full-year 2020 guidance for revenues, profitability and free cash flow, given sequential improvement in its performance.
Inside the Headlines
Adjusted earnings of $5.40 per share topped the consensus estimate of $4.33 by 24.7%. However, the reported figure decreased 9.4% from the prior-year figure. Total revenues of $2.19 billion surpassed the consensus mark of $2.14 billion by 2.3% but declined 12.1% year over year.
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 13.3% from the year-ago quarter, mainly due to the pandemic’s impacts. Nonetheless, rental volumes improved sequentially in each month in the quarter, consistent with normal seasonality.
Quarterly fleet productivity was down 8% year over year due to lower rental volumes. That said, fleet productivity improved 560 bps sequentially, depicting better fleet absorption.
Used equipment sales generated $199 million of proceeds compared with $198 million a year ago. Adjusted gross margin of 44.2% contracted 180 bps due to changes in the mix of equipment sold and pricing.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues fell 15.3% year over year to $1.39 billion. Rental gross margin contracted 190 bps year over year to 39% owing to increased depreciation expenses and the COVID-19 pandemic’s impact on revenues.
Trench, Power and Pump or Specialty Rentals: Segmental rental revenues decreased 6.9% year over year to $470 million. Rental gross margin, however, expanded 110 bps on a year-over-year basis to 49.8% due to lower operating costs, partly offset by increased depreciation expenses.
Margins
The company’s total equipment rentals gross margin dropped 90 bps year over year. Adjusted EBITDA also dropped 10.4% from the prior-year quarter to $1.08 billion. Nonetheless, adjusted EBITDA margin expanded 90 bps to 49.4%. The improvement reflects the combined impact of the actions taken by the company to manage costs.
Balance Sheet
United Rentals had cash and cash equivalents of $174 million as of Sep 30, 2020 compared with $52 million at 2019-end. Total liquidity was $3.43 billion at quarter-end. The company’s free cash flow was $583 million for the third quarter, higher than $302 million a year ago.
Net leverage ratio was 2.4 as of Sep 30, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $1.499 billion year to date. It has repurchased $257 million of shares under the current $500-million repurchase program so far in 2020.
Lifts 2020 Guidance
Total revenues are expected in the range of $8.35-$8.45 billion (versus 8.05-$8.45 billion expected earlier), indicating a decrease from $9.35 billion in 2019.
Adjusted EBITDA is projected between $3.825 billion and $3.875 billion (versus $3.6-$3.8 billion expected earlier), suggesting a decline from $4.36 billion in 2019.
Net rental capital expenditures after gross purchases are projected in the range of $100-$150 million (versus $50-$150 million anticipated earlier), implying a decline from $1.3 billion in 2019.
Net cash provided by operating activities is expected in the range of $2.45-$2.55 billion (versus $2.25-$2.55 billion projected earlier), 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-$2.3 billion (versus $2-$2.2 billion of earlier expectation), which suggests an increase from $1.59 billion reported in 2019.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, United Rentals has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Outlook
United Rentals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.