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Things to Consider Before United Rentals' (URI) Q4 Earnings

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United Rentals, Inc. (URI - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, after market close.

In the last reported quarter, United Rentals’ adjusted earnings and revenues topped the Zacks Consensus Estimate by 3.6% and 2.3%, respectively. This largest equipment rental company’s third-quarter 2023 adjusted earnings and revenues grew 26.5% and 23.4% year over year, respectively.

Markedly, its earnings surpassed expectations in two of the trailing four quarters and missed on other two occasions, with the average surprise being 1.2%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has declined to $10.85 from $10.92 over the past 30 days. The estimated figure indicates 11.4% growth from the year-ago EPS of $9.74. The consensus mark for revenues is $3.63 billion, suggesting a 10.1% 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

United Rentals' fourth-quarter performance is expected to have reflected continued demand in its end markets and the robustness of its fundamental rental operations. Higher pricing and improved activity level, backed by stronger demand in each of the end markets served in North America, are expected to have aided United Rentals’ fourth-quarter results.

Notably, federally funded infrastructure projects, industrial manufacturing, energy and power activities are expected to have benefited the company’s quarterly results. The company’s quarterly results are likely to have benefited from solid mega-project activity. URI’s solid exposure to blue-chip engineering & construction accounts and industry-leading market share are expected to have reflected in its quarterly performance. Furthermore, acquisitions are expected to have helped United Rentals to boost the top line in the quarter to be reported.

The company’s investment in the General Rental segment (wherein the primary growth drivers are non-residential construction and plant maintenance) also bodes well. Overall, industrial markets are expected to have aided the company’s performance.

Equipment Rentals revenues (which accounted for 85.6% of its total revenues in the third quarter of 2023) are expected to have registered growth in the to-be-reported quarter. Our model predicts Equipment Rentals revenues to increase 11.1% to $3,051.6 million in the fourth quarter from a year ago.

Our model predicts Sales of Rental Equipment to decline 0.8% to $405.6 million from the year-ago reported figure.

New Equipment sales suggest an increase of 36.7% year over year. The contractor supplies sales indicate 15.8% growth from the prior year. Service and other revenues suggest 19.6% growth on a year-over-year basis.

Overall, the company’s General Rentals revenues are expected to grow 9.2% to $2,709.4 million in the quarter from the year-ago period. On the other hand, the Specialty segment is expected to have registered 13.1% growth to $920.6 million in the fourth quarter from a year ago.

From the margin perspective, supply-chain disruptions and higher inflation might be causes of concern. The consolidated operating margin is expected to decline to 28.2% in the quarter from 31.1% a year ago.

We expected adjusted EBITDA for the quarter to grow 6.7% year over year to $1,757.6 million. Adjusted EBITDA margin, however, is expected to decline 160 basis points to 48.4%.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for United Rentals for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here, as you will see below.

Earnings ESP: United Rentals has an Earnings ESP of -0.24%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: URI currently carries a Zacks Rank #2.

Stocks With Favorable Combination

Here are some companies in the Zacks Construction sector which, according to our model, have the right combination of elements to post an earnings beat on their quarters to be reported.

Fluor Corporation (FLR - Free Report) has an Earnings ESP of +3.07% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

FLR’s earnings for the to-be-reported quarter are expected to grow 25.6%. The company reported better-than-expected earnings in two of the last four quarters but missed on other two occasions, the average surprise being 37.5%.

Martin Marietta Materials, Inc. (MLM - Free Report) has an Earnings ESP of +1.45% and carries a Zacks Rank #3.

MLM’s earnings topped the consensus mark in all the last four quarters, with the average being 37.3%. Earnings for the to-be-reported quarter are expected to rise 30.6% year over year.

Vulcan Materials Company (VMC - Free Report) has an Earnings ESP of +0.45% and carries a Zacks Rank #3.

VMC’s earnings topped the consensus mark in three of the last four quarters and missed on one occasion, with the average being 13.6%. Earnings for the to-be-reported quarter are expected to grow 25% year over year.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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