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United Rentals (URI) to Report Q4 Earnings: What's in Store?

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United Rentals, Inc. (URI - Free Report) is scheduled to report fourth-quarter 2020 results on Jan 27, after market close.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 24.7% and 2.3%, respectively. However, this largest equipment rental company’s third-quarter earnings and revenues declined 9.4% and 12.1%, respectively.

Markedly, its earnings surpassed expectations in 27 of the last 29 quarters. The company topped revenue estimates in the trailing 14 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased 0.2% in the past seven days to $4.28 per share. This indicates a 23.6% decline from the year-ago earnings of $5.60 per share. The consensus mark for revenues is $2.17 billion, suggesting an 11.5% year-over-year decline.

United Rentals, Inc. Price and EPS Surprise

United Rentals, Inc. Price and EPS Surprise

United Rentals, Inc. price-eps-surprise | United Rentals, Inc. Quote

Factors to Note

The company is expected to have witnessed lower earnings and revenues in the fourth quarter due to COVID-induced headwinds. Undeniably, the COVID-19 pandemic has been impacting construction and industrial vertical markets served by United Rentals. Overall, the company’s construction markets are expected to deliver better results than industrial markets, particularly oil and gas, which is anticipated to have remained soft during the quarter.

Softness in the oil & gas market is expected to have impacted United Rentals’ business in the fourth quarter. Slower industrial growth may have also added to the woes. Although the overall business picked up pace sequentially, the Equipment Rentals business (accounting for more than 83% of its total revenues) is expected to have generated lower volume and rental rate growth.

The Zacks Consensus Estimate for Equipment Rentals revenues of $1,810 million indicates a 12.2% decline from the year-ago period and 2.7% decrease from third-quarter 2020. The same for rental equipment and new equipment sales suggests a decrease of 9.8% and 19%, respectively, from the year-ago reported figures. The consensus estimate for Contractor supplies sales indicates a 4.5% decline from the prior year. The same for Service and other revenues also suggests a 0.4% year-over-year decline in the quarter.

From the margin perspective, higher rental operating costs in a slower growth environment — including expenses related to repair and maintenance of fleet in upstream oil and gas markets — as well as increase in lower-margin used equipment sales are likely to have affected its bottom line.

The Zacks Consensus Estimate for equipment rentals gross profit is pegged at $699 million, indicating a 40.4% sequential decline.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for United Rentals this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: United Rentals has an Earnings ESP of +10.34%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

Here are some other companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

D.R. Horton, Inc. (DHI - Free Report) has an Earnings ESP of +8.91% and a Zacks Rank #2.

Century Communities, Inc. (CCS - Free Report) has an Earnings ESP of +2.09% and a Zacks Rank #1.

M.D.C. Holdings, Inc. (MDC - Free Report) has an Earnings ESP of +2.22% and a Zacks Rank #2.

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