Back to top

Image: Bigstock

United Rentals (URI) Soars to 52-Week High, Time to Cash Out?

Read MoreHide Full Article

Shares of United Rentals (URI - Free Report) have been strong performers lately, with the stock up 6.6% over the past month. The stock hit a new 52-week high of $342.96 in the previous session. United Rentals has gained 47.7% since the start of the year compared to the 26.2% move for the Zacks Construction sector and the 19.6% return for the Zacks Building Products - Miscellaneous industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 28, 2021, United Rentals reported EPS of $3.45 versus consensus estimate of $3.1.

For the current fiscal year, United Rentals is expected to post earnings of $20.8 per share on $9.28 billion in revenues. This represents a 19.27% change in EPS on an 8.81% change in revenues. For the next fiscal year, the company is expected to earn $23.82 per share on $9.85 billion in revenues. This represents a year-over-year change of 14.51% and 6.11%, respectively.

Valuation Metrics

United Rentals may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

United Rentals has a Value Score of B. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 16.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 7.6X versus its peer group's average of 15.9X. Additionally, the stock has a PEG ratio of 1.23. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, United Rentals currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if United Rentals passes the test. Thus, it seems as though United Rentals shares could still be poised for more gains ahead.

How Does United Rentals Stack Up to the Competition?

Shares of United Rentals have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including BELLWAY (BLWYY - Free Report) , Owens Corning (OC - Free Report) , and Advanced Drainage Systems (WMS - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 25% of all the industries we have in our universe, so it looks like there are some nice tailwinds for United Rentals, even beyond its own solid fundamental situation.

Published in