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Improved Activity to Aid United Rentals' (URI) Q2 Earnings

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United Rentals, Inc. (URI - Free Report) is scheduled to report second-quarter 2021 results on Jul 28, after market close.

In the last reported quarter, its earnings and revenues beat the Zacks Consensus Estimate by 11.3% and 2.4%, respectively. This largest equipment rental company’s first-quarter earnings grew 3% but revenues declined 3.2% year over year.

Markedly, its earnings surpassed expectations in 29 of the last 31 quarters. The company topped revenue estimates in the trailing 16 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has increased 1.3% in the past 30 days to $4.81 per share. This indicates 30.7% growth from the year-ago earnings of $3.68 per share. The consensus mark for revenues is $2.19 billion, suggesting a 13.1% year-over-year improvement.

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

Improved activity level backed by stronger demand in residential and commercial construction as well as for warehouse-related utilities and industrial products is expected to have benefited the company in the second quarter. There has been a return of activity in United Rentals’ manufacturing sector after more than a year of industrial recession. Acquisitions (like Franklin Equipment buyout) are also expected to have helped United Rentals to boost the top line in the second quarter.

Construction verticals, which have been most resilient amid the COVID-19 pandemic, are still going strong. In terms of end market, solid activity in power, HVAC, pharma, biotech, warehousing, distribution, data center and hospitals is likely to aid the company’s quarterly results. Non-residential construction (its largest revenue base) has been registering improvement. United Rentals has been witnessing rising demand for specialty construction products, which have been significantly contributing to the trench, power and fluid solutions segment’s revenues. Also, demand for used equipment remained solid post the easing of pandemic-led restrictions.

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. Clearly, the oil and gas vertical is lagging, but has started to recover.

The Zacks Consensus Estimate for Equipment Rentals revenues (accounting for more than 84% of its total revenues) of $1,884 million indicates 14.7% growth from the year-ago period. The same for rental equipment suggests an increase of 20.5% from the year-ago reported figure.

The consensus estimate for new equipment sales suggests an increase of 3.8% year over year. The consensus estimate for Contractor supplies sales indicates 11.8% growth from the prior year. The same for Service and other revenues suggests 9.2% growth on a year-over-year 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. Also, higher inflation may have been a cause of concern.

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 +4.89%. 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 also have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Owens Corning (OC - Free Report) has an Earnings ESP of +14.56% and a Zacks Rank #2.

Quanta Services, Inc. (PWR - Free Report) has an Earnings ESP of +10.32% and a Zacks Rank #2.

ChampionX Corporation (CHX - Free Report) has an Earnings ESP of +10.00% and holds a Zacks Rank #3.