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United Rentals (URI) Q3 Earnings Lag, Rise Y/Y, 2021 View Up
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United Rentals, Inc.’s (URI - Free Report) shares gained 2.7% in the after-hours trading session on Oct 27, despite lower-than-expected third-quarter 2021 results. Although the company’s earnings and revenues missed their respective Zacks Consensus Estimate, it raised full-year expectations for total revenues and adjusted EBITDA, given broad-based recovery of its end markets.
Matthew Flannery, CEO of United Rentals, said, “While early in our planning process, virtually all key indicators point to a sustained recovery. At this same time, the industry has remained disciplined and our strategic partnerships with key suppliers will benefit the company as we invest in fleet to support our customers. Combined, this should position us to deliver strong growth, improved margins and attractive returns in 2022."
Inside the Headlines
Adjusted earnings of $6.58 per share missed the consensus estimate of $6.80 by 3.2%. Nonetheless, the reported figure increased 21.9% from the prior-year figure of $5.40 per share. Total revenues of $2.596 billion fell shy of the consensus mark of $2.603 billion by 0.3% but grew 18.7% year over year.
Rental revenues increased 22.4% from the year-ago quarter to $2.277 billion. Fleet productivity was up 13.5% year over year backed by better fleet absorption.
Used equipment sales decreased 8% from a year ago. Adjusted gross margin of 50.3% expanded 610 basis points (bps) due to higher pricing, which marked the fourth consecutive quarter of increase. Used equipment proceeds were 60% of original equipment cost or OEC, up 900 bps from the year-ago period.
United Rentals, Inc. Price, Consensus and EPS Surprise
General Rentals: Segment equipment rentals’ revenues grew 17.6% year over year to $1.636 billion. Rental gross margin expanded 70 bps year over year to 39.7%, courtesy of a decrease in depreciation expense (as a percentage of revenues).
Specialty/Trench, Power and Pump: Segmental rental revenues increased 36.4% year over year to $641 million. Rentals gross margin increased 170 bps on a year-over-year basis to 51.5% due to lower depreciation and labor expenses.
Margins
The company’s total equipment rentals gross margin rose 120 bps year over year to 43%.
Adjusted EBITDA also grew 14.1% from the prior-year quarter to $1,233 million. Yet, adjusted EBITDA margin contracted 190 bps to 47.5% for the quarter owing to lower rental margin, thanks to higher bonus accrual, increased delivery expense and greater insurance costs.
Balance Sheet
United Rentals had cash and cash equivalents of $320 million as of Sep 30, 2021 compared with $202 million at 2020-end. Total liquidity was $2.611 billion at quarter-end.
Cash from operating activities increased 31.4% to $1,087 million but free cash flow fell to $92 million from the prior-year quarter figure of $583 million due to higher purchases of rental equipment.
Raised 2021 Guidance
Backed by solid results for the first nine months of 2021 and the recently completed acquisitions, the company lifted its full-year 2021 financial guidance.
Total revenues are now expected in the range of $9.60-$9.75 billion versus $9.45-$9.75 billion projected earlier. This indicates a solid increase from $8.530 billion reported in 2020.
Adjusted EBITDA is now projected between $4.325 billion and $4.400 billion compared with the prior projection of $4.225-$4.375 billion. The current projection indicates a massive jump from the year-ago figure of $3.932 billion.
Net rental capital expenditures after gross purchases are now projected to be $1.75-$1.95 billion compared with $1.5-$1.7 billion expected earlier, indicating an increase from $961 million in 2020.
Net cash provided by operating activities is anticipated in the range of $3.375-$3.725 billion versus $3.25-$3.65 billion projected earlier, suggesting a rise from $2.658 billion in 2020.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $1.45-$1.65 billion compared with $1.6-$1.8 billion anticipated earlier. This suggests a decrease from $2.454 billion reported in 2020.
Zacks Rank & Key Picks
United Rentals currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Building Products – Miscellaneous industry include TopBuild Corp. (BLD - Free Report) , Construction Partners, Inc. (ROAD - Free Report) and PGT, Inc. . While TopBuild sports a Zacks Rank #1, the other two stocks carry a Zacks Rank #2 (Buy).
TopBuild, Construction Partners, and PGT’s earnings for the current year are expected to increase 47.5%, 48.1%, and 6.2%, respectively.
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United Rentals (URI) Q3 Earnings Lag, Rise Y/Y, 2021 View Up
United Rentals, Inc.’s (URI - Free Report) shares gained 2.7% in the after-hours trading session on Oct 27, despite lower-than-expected third-quarter 2021 results. Although the company’s earnings and revenues missed their respective Zacks Consensus Estimate, it raised full-year expectations for total revenues and adjusted EBITDA, given broad-based recovery of its end markets.
Matthew Flannery, CEO of United Rentals, said, “While early in our planning process, virtually all key indicators point to a sustained recovery. At this same time, the industry has remained disciplined and our strategic partnerships with key suppliers will benefit the company as we invest in fleet to support our customers. Combined, this should position us to deliver strong growth, improved margins and attractive returns in 2022."
Inside the Headlines
Adjusted earnings of $6.58 per share missed the consensus estimate of $6.80 by 3.2%. Nonetheless, the reported figure increased 21.9% from the prior-year figure of $5.40 per share. Total revenues of $2.596 billion fell shy of the consensus mark of $2.603 billion by 0.3% but grew 18.7% year over year.
Rental revenues increased 22.4% from the year-ago quarter to $2.277 billion. Fleet productivity was up 13.5% year over year backed by better fleet absorption.
Used equipment sales decreased 8% from a year ago. Adjusted gross margin of 50.3% expanded 610 basis points (bps) due to higher pricing, which marked the fourth consecutive quarter of increase. Used equipment proceeds were 60% of original equipment cost or OEC, up 900 bps from the year-ago period.
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote
Segment Discussion
General Rentals: Segment equipment rentals’ revenues grew 17.6% year over year to $1.636 billion. Rental gross margin expanded 70 bps year over year to 39.7%, courtesy of a decrease in depreciation expense (as a percentage of revenues).
Specialty/Trench, Power and Pump: Segmental rental revenues increased 36.4% year over year to $641 million. Rentals gross margin increased 170 bps on a year-over-year basis to 51.5% due to lower depreciation and labor expenses.
Margins
The company’s total equipment rentals gross margin rose 120 bps year over year to 43%.
Adjusted EBITDA also grew 14.1% from the prior-year quarter to $1,233 million. Yet, adjusted EBITDA margin contracted 190 bps to 47.5% for the quarter owing to lower rental margin, thanks to higher bonus accrual, increased delivery expense and greater insurance costs.
Balance Sheet
United Rentals had cash and cash equivalents of $320 million as of Sep 30, 2021 compared with $202 million at 2020-end. Total liquidity was $2.611 billion at quarter-end.
Cash from operating activities increased 31.4% to $1,087 million but free cash flow fell to $92 million from the prior-year quarter figure of $583 million due to higher purchases of rental equipment.
Raised 2021 Guidance
Backed by solid results for the first nine months of 2021 and the recently completed acquisitions, the company lifted its full-year 2021 financial guidance.
Total revenues are now expected in the range of $9.60-$9.75 billion versus $9.45-$9.75 billion projected earlier. This indicates a solid increase from $8.530 billion reported in 2020.
Adjusted EBITDA is now projected between $4.325 billion and $4.400 billion compared with the prior projection of $4.225-$4.375 billion. The current projection indicates a massive jump from the year-ago figure of $3.932 billion.
Net rental capital expenditures after gross purchases are now projected to be $1.75-$1.95 billion compared with $1.5-$1.7 billion expected earlier, indicating an increase from $961 million in 2020.
Net cash provided by operating activities is anticipated in the range of $3.375-$3.725 billion versus $3.25-$3.65 billion projected earlier, suggesting a rise from $2.658 billion in 2020.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $1.45-$1.65 billion compared with $1.6-$1.8 billion anticipated earlier. This suggests a decrease from $2.454 billion reported in 2020.
Zacks Rank & Key Picks
United Rentals currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Building Products – Miscellaneous industry include TopBuild Corp. (BLD - Free Report) , Construction Partners, Inc. (ROAD - Free Report) and PGT, Inc. . While TopBuild sports a Zacks Rank #1, the other two stocks carry a Zacks Rank #2 (Buy).
TopBuild, Construction Partners, and PGT’s earnings for the current year are expected to increase 47.5%, 48.1%, and 6.2%, respectively.