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United Rentals (URI) Gains More Than 37% YTD: More Room to Run?
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United Rentals, Inc. (URI - Free Report) stock has gained 37.2% year to date, outperforming the Zacks Building Products - Miscellaneous industry’s 35.9% growth. The company has been gaining from the sustained demand in its end markets and the strength of its core rental business. The year 2023 exhibits widespread growth opportunities across its verticals, with continuous growth opportunities for non-residential and industrial verticals.
This Zacks Rank #3 (Hold) stock has a long-term earnings growth rate of 16%, which highlights its inherent strength. We believe that United Rentals offers a sound investment opportunity, which is evident from its VGM Score of A.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates. Over the said time frame, the Zacks Consensus Estimate for earnings of $40.63 for 2023 has increased from $39.89. The estimated figure indicates 25% year-over-year growth.
However, high variable costs and intense competition are concerns.
Image Source: Zacks Investment Research
Let’s take a look at the factors supporting the growth.
Solid End-Market Demand, High Infrastructural Investment: United Rentals and other construction companies have been riding on robust worldwide shifts toward infrastructure modernization, energy transition, bolstered national security, and a potential upsurge in global supply-chain investments. Notably, United Rentals is expected to maintain its momentum in the near term, as the company’s solutions are closely aligned with President Biden’s policies and industry trends.
The need to rebuild the nation’s deteriorating roads and bridges and fund new climate-resilient and broadband initiatives is expected to help URI. The company expects a diverse mix of federal projects for road and bridge work, water control, harbors and ports and the power grid, which will drive growth in 2023.
In second-quarter 2023, equipment rentals represented 83.9% of the company’s total revenues. United Rentals has been witnessing widespread growth in rental revenues. In the quarter, rental revenues grew 21% year over year to $2.98 billion. For the third quarter and 2023, our model predicts equipment rentals revenue growth of 14.6% to $3.13 billion and 18% to $11.93 billion, respectively, year over year.
URI has seen substantial opportunities in 2023 across federally funded infrastructure projects, industrial manufacturing, energy and power. It expects to deliver another year of profitable growth, strong cash flow and attractive returns for shareholders.
Upbeat View: Backed by the company’s multi-year tailwinds in infrastructure, manufacturing, and energy and power, along with strong customer demand, URI raised its 2023 guidance on the second-quarter 2023 earnings call. This reflects stronger growth in the core rental business and sustained demand in its end markets. The optimism was supported by persistent share growth opportunities for certain non-residential verticals, including data centers, distribution centers and renewables, as well as the automotive and ship plants.
Total revenues are expected to be in the range of $14-$14.3 billion compared with $13.7-$14.2 billion projected earlier. Adjusted EBITDA is projected to be between $6.75 billion and $6.9 billion compared with the prior projection of $6.6-$6.85 billion.
Higher ROE: United Rentals’ trailing 12-month return on equity (ROE) is indicative of its growth potential. The company’s ROE of 36.7% compares favorably with the industry’s 10%, which signals more efficiency in using shareholders’ funds than its peers.
3 Construction Stocks to Consider
Based in Los Angeles, KB Home (KBH - Free Report) has been gaining from prudent growth plans, a solid existing geographic footprint and a built-to-order approach.
KBH currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2023 and 2024 earnings of $6.29 per share and $6.85 per share has increased 2.3% and 1.9%, respectively, over the past 30 days. Shares of the company have gained 67.4% year to date (YTD). You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA (BZH - Free Report) designs, builds and sells single-family homes. Shares of the company have gained 153.7% YTD.
BZH currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 and 2024 have increased to $4.75 per share and $5.21 per share from $3.95 and $4.46, respectively, over the past 30 days.
Taylor Morrison Home Corporation’s (TMHC - Free Report) ongoing operational enhancements, acquisition synergies and robust pricing power have more than offset the inflationary pressure and delays in some closings.
TMHC currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its 2023 and 2024 earnings has been revised upward to $7.05 per share and $7.44 per share from $6.81 and $6.89, respectively, over the past 30 days. Shares of the company have gained 60.3% YTD.
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United Rentals (URI) Gains More Than 37% YTD: More Room to Run?
United Rentals, Inc. (URI - Free Report) stock has gained 37.2% year to date, outperforming the Zacks Building Products - Miscellaneous industry’s 35.9% growth. The company has been gaining from the sustained demand in its end markets and the strength of its core rental business. The year 2023 exhibits widespread growth opportunities across its verticals, with continuous growth opportunities for non-residential and industrial verticals.
This Zacks Rank #3 (Hold) stock has a long-term earnings growth rate of 16%, which highlights its inherent strength. We believe that United Rentals offers a sound investment opportunity, which is evident from its VGM Score of A.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates. Over the said time frame, the Zacks Consensus Estimate for earnings of $40.63 for 2023 has increased from $39.89. The estimated figure indicates 25% year-over-year growth.
However, high variable costs and intense competition are concerns.
Image Source: Zacks Investment Research
Let’s take a look at the factors supporting the growth.
Solid End-Market Demand, High Infrastructural Investment: United Rentals and other construction companies have been riding on robust worldwide shifts toward infrastructure modernization, energy transition, bolstered national security, and a potential upsurge in global supply-chain investments. Notably, United Rentals is expected to maintain its momentum in the near term, as the company’s solutions are closely aligned with President Biden’s policies and industry trends.
The need to rebuild the nation’s deteriorating roads and bridges and fund new climate-resilient and broadband initiatives is expected to help URI. The company expects a diverse mix of federal projects for road and bridge work, water control, harbors and ports and the power grid, which will drive growth in 2023.
In second-quarter 2023, equipment rentals represented 83.9% of the company’s total revenues. United Rentals has been witnessing widespread growth in rental revenues. In the quarter, rental revenues grew 21% year over year to $2.98 billion. For the third quarter and 2023, our model predicts equipment rentals revenue growth of 14.6% to $3.13 billion and 18% to $11.93 billion, respectively, year over year.
URI has seen substantial opportunities in 2023 across federally funded infrastructure projects, industrial manufacturing, energy and power. It expects to deliver another year of profitable growth, strong cash flow and attractive returns for shareholders.
Upbeat View: Backed by the company’s multi-year tailwinds in infrastructure, manufacturing, and energy and power, along with strong customer demand, URI raised its 2023 guidance on the second-quarter 2023 earnings call. This reflects stronger growth in the core rental business and sustained demand in its end markets. The optimism was supported by persistent share growth opportunities for certain non-residential verticals, including data centers, distribution centers and renewables, as well as the automotive and ship plants.
Total revenues are expected to be in the range of $14-$14.3 billion compared with $13.7-$14.2 billion projected earlier. Adjusted EBITDA is projected to be between $6.75 billion and $6.9 billion compared with the prior projection of $6.6-$6.85 billion.
Higher ROE: United Rentals’ trailing 12-month return on equity (ROE) is indicative of its growth potential. The company’s ROE of 36.7% compares favorably with the industry’s 10%, which signals more efficiency in using shareholders’ funds than its peers.
3 Construction Stocks to Consider
Based in Los Angeles, KB Home (KBH - Free Report) has been gaining from prudent growth plans, a solid existing geographic footprint and a built-to-order approach.
KBH currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2023 and 2024 earnings of $6.29 per share and $6.85 per share has increased 2.3% and 1.9%, respectively, over the past 30 days. Shares of the company have gained 67.4% year to date (YTD). You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA (BZH - Free Report) designs, builds and sells single-family homes. Shares of the company have gained 153.7% YTD.
BZH currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 and 2024 have increased to $4.75 per share and $5.21 per share from $3.95 and $4.46, respectively, over the past 30 days.
Taylor Morrison Home Corporation’s (TMHC - Free Report) ongoing operational enhancements, acquisition synergies and robust pricing power have more than offset the inflationary pressure and delays in some closings.
TMHC currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its 2023 and 2024 earnings has been revised upward to $7.05 per share and $7.44 per share from $6.81 and $6.89, respectively, over the past 30 days. Shares of the company have gained 60.3% YTD.