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Lower Revenues & Margins to Hurt United Rentals' (URI) Q1 Earnings
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United Rentals, Inc. (URI - Free Report) is scheduled to report first-quarter 2021 results on Apr 28, after market close.
In the last reported quarter, its earnings and revenues beat the Zacks Consensus Estimate by 17.8% and 4.9%, respectively. However, this largest equipment rental company’s fourth-quarter earnings and revenues declined 10% and 7.2%, respectively.
Markedly, its earnings surpassed expectations in 28 of the last 30 quarters. The company topped revenue estimates in the trailing 15 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased 4.4% in the past 30 days to $3.10 per share. This indicates a 7.5% decline from the year-ago earnings of $3.35 per share. The consensus mark for revenues is $2.01 billion, suggesting a 5.4% year-over-year decline.
Tough comps and lower fleet productivity are expected to have weighed on the company’s top line in the first quarter on a year-over-year basis. Overall, it is expected to have witnessed lower earnings and revenues in the first quarter due to COVID-induced headwinds. Undeniably, the situation improved sequentially. However, 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 first quarter. Slower industrial growth may have also added to the woes.
The Zacks Consensus Estimate for Equipment Rentals revenues (accounting for more than 84% of its total revenues) of $1,662 million indicates a 6.8% decline from the year-ago period and 10.4% decrease from fourth-quarter 2020. The same for rental equipment suggests an increase of 2.9% from the year-ago reported figure but a decrease of 22.2% sequentially.
The consensus estimate for new equipment sales suggests a decrease of 1.6% year over year and 22.8% sequentially. The consensus estimate for Contractor supplies sales indicates a 2.3% decline from both the prior year and sequentially. The same for Service and other revenues suggests 0.8% growth on a year-over-year as well as sequential basis for 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 $583 million, indicating a 4.4% year-over-year and 20.4% 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 +6.27%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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.
Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #3.
PotlatchDeltic Corporation (PCH - Free Report) has an Earnings ESP of +1.56% and sports a Zacks Rank #1.
Martin Marietta Materials, Inc. (MLM - Free Report) has an Earnings ESP of +8.47% and a Zacks Rank #3.
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Lower Revenues & Margins to Hurt United Rentals' (URI) Q1 Earnings
United Rentals, Inc. (URI - Free Report) is scheduled to report first-quarter 2021 results on Apr 28, after market close.
In the last reported quarter, its earnings and revenues beat the Zacks Consensus Estimate by 17.8% and 4.9%, respectively. However, this largest equipment rental company’s fourth-quarter earnings and revenues declined 10% and 7.2%, respectively.
Markedly, its earnings surpassed expectations in 28 of the last 30 quarters. The company topped revenue estimates in the trailing 15 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased 4.4% in the past 30 days to $3.10 per share. This indicates a 7.5% decline from the year-ago earnings of $3.35 per share. The consensus mark for revenues is $2.01 billion, suggesting a 5.4% year-over-year decline.
United Rentals, Inc. Price and EPS Surprise
United Rentals, Inc. price-eps-surprise | United Rentals, Inc. Quote
Factors to Note
Tough comps and lower fleet productivity are expected to have weighed on the company’s top line in the first quarter on a year-over-year basis. Overall, it is expected to have witnessed lower earnings and revenues in the first quarter due to COVID-induced headwinds. Undeniably, the situation improved sequentially. However, 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 first quarter. Slower industrial growth may have also added to the woes.
The Zacks Consensus Estimate for Equipment Rentals revenues (accounting for more than 84% of its total revenues) of $1,662 million indicates a 6.8% decline from the year-ago period and 10.4% decrease from fourth-quarter 2020. The same for rental equipment suggests an increase of 2.9% from the year-ago reported figure but a decrease of 22.2% sequentially.
The consensus estimate for new equipment sales suggests a decrease of 1.6% year over year and 22.8% sequentially. The consensus estimate for Contractor supplies sales indicates a 2.3% decline from both the prior year and sequentially. The same for Service and other revenues suggests 0.8% growth on a year-over-year as well as sequential basis for 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 $583 million, indicating a 4.4% year-over-year and 20.4% 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 +6.27%. 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.
Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #3.
PotlatchDeltic Corporation (PCH - Free Report) has an Earnings ESP of +1.56% and sports a Zacks Rank #1.
Martin Marietta Materials, Inc. (MLM - Free Report) has an Earnings ESP of +8.47% and a Zacks Rank #3.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>