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United Rentals (URI) Stock Up on Q4 Earnings Beat, Margins Fall
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United Rentals, Inc.’s (URI - Free Report) shares gained 4% in the after-hours trading session on Jan 24 after it reported impressive fourth-quarter 2023 results. Its earnings and revenues beat the Zacks Consensus Estimate and increased on a year-over-year basis.
The upside was mainly driven by sustained growth across the business, profitability and returns, underpinned by broad-based activity.
Moreover, URI has provided strong guidance for 2024, given the strength of the present market condition and the multi-year tailwinds the company sees across infrastructure, manufacturing and energy and power.
Inside the Headlines
Adjusted earnings of $11.26 per share topped the Zacks Consensus Estimate of $10.85 by 3.8%. The reported figure increased by 15.6% from the prior-year figure of $9.74 per share.
United Rentals, Inc. Price, Consensus and EPS Surprise
Total revenues of $3.728 billion beat the consensus mark of $3.628 billion by 2.8% and grew 13.1% year over year.
Rental revenues increased 13.5% from the year-ago quarter to $3.12 billion. This upside was mainly attributable to broad-based demand growth across end markets served by the company. Also, Ahern Rentals' buyout contributed to the growth. Fleet productivity inched up 0.3% and average original equipment costs (“OEC”) increased 15.1% year over year.
On a pro forma basis, rental revenues grew 7.6% year over year, given a 6.9% increase in average OEC and a 2.4% increase in fleet productivity.
Used equipment sales rose 7.1% from a year ago. The Used equipment sales produced an adjusted gross margin of 55.3%, which contracted 630 basis points (bps). This decline stemmed from the anticipated normalization of the used equipment market and the impact of sales of equipment acquired from Ahern Rentals.
Segment Discussion
General Rentals: This segment registered 13.1% year-over-year growth in rental revenues to $2.289 billion. Rental gross margin fell 250 bps year over year to 39.1% due to the impact of higher depreciation expense related to the Ahern Rentals acquisition.
Specialty: Segmental rental revenues increased 14.6% year over year to $830 million. Rentals’ gross margin contracted 210 bps on a year-over-year basis to 47.2%. This was due to a higher proportion of certain lower-margin ancillary revenues and increases in certain operating expenses.
Margins
The company’s total equipment rentals’ gross margin declined 230 bps year over year to 41.3%.
Adjusted EBITDA for the reported period grew 9.8% year over year to $1.809 billion. However, the adjusted EBITDA margin decreased 150 bps to 48.5%.
2023 Highlights
For the full year, the company generated total revenues of $14.332 billion (up 23.1%) and adjusted earnings of $40.74 per share (up 25.4% from 2022).
Adjusted EBITDA rose 22.1%, but adjusted EBITDA margin contracted 50 bps to 47.8% year over year.
Balance Sheet
United Rentals had cash and cash equivalents of $363 million as of Dec 31, 2023, up from $106 million at 2022-end. Total liquidity was $3.33 billion at 2023-end. Long-term debt at the fourth quarter of 2023-end was $10.1 billion, down from $11.21 billion at 2022-end.
On Dec 31, 2023, the net leverage ratio was 1.6x compared with 2.0x on Dec 31, 2022. Return on invested capital increased 90 bps year over year to 13.6% for the trailing 12 months ended on Dec 31, 2023.
During 2023, cash from operating activities improved 6.1% year over year to $4.704 billion. Free cash flow grew 30.7% year over year to $2.306 billion for the said period.
2024 Guidance
Total revenues are expected to be in the range of $14.65-$15.15 billion. Adjusted EBITDA is projected to be between $6.9 billion and $7.15 billion, indicating an increase from $6.857 billion in 2023.
Net rental capital expenditure is projected to be in the range of $1.9-$2.2 billion after gross purchases of $3.4-$3.7 billion versus $1.934 billion after gross purchases of $3.508 billion in 2023.
Net cash provided by operating activities is anticipated to be in the range of $4.15-$4.75 billion.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected to be in the range of $2-$2.2 billion versus $2.314 billion in 2023.
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2024 (ended Dec 31, 2023) results, wherein earnings missed the Zacks Consensus Estimate, but revenues surpassed the same.
On a year-over-year basis, both the top and bottom lines increased. The upside was backed by the supply of both new and existing homes as affordable price points remain limited and robust housing demand is supported by favorable demographics amid elevated inflation and mortgage/interest rates.
KB Home (KBH - Free Report) reported better-than-expected results in fourth-quarter fiscal 2023 (ended Nov 30, 2023). Both the earnings and revenues beat the Zacks Consensus Estimate. With this, the company’s earnings and revenues surpassed the consensus mark in four consecutive quarters.
Looking forward to the first quarter and the entirety of 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Acuity Brands, Inc. (AYI - Free Report) reported impressive results in first-quarter fiscal 2024 (ending Nov 30, 2023), with earnings and revenues surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 15th consecutive quarter.
Despite a year-over-year decline in sales in the lighting business, AYI reported strong fiscal first-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.
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United Rentals (URI) Stock Up on Q4 Earnings Beat, Margins Fall
United Rentals, Inc.’s (URI - Free Report) shares gained 4% in the after-hours trading session on Jan 24 after it reported impressive fourth-quarter 2023 results. Its earnings and revenues beat the Zacks Consensus Estimate and increased on a year-over-year basis.
The upside was mainly driven by sustained growth across the business, profitability and returns, underpinned by broad-based activity.
Moreover, URI has provided strong guidance for 2024, given the strength of the present market condition and the multi-year tailwinds the company sees across infrastructure, manufacturing and energy and power.
Inside the Headlines
Adjusted earnings of $11.26 per share topped the Zacks Consensus Estimate of $10.85 by 3.8%. The reported figure increased by 15.6% from the prior-year figure of $9.74 per share.
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote
Total revenues of $3.728 billion beat the consensus mark of $3.628 billion by 2.8% and grew 13.1% year over year.
Rental revenues increased 13.5% from the year-ago quarter to $3.12 billion. This upside was mainly attributable to broad-based demand growth across end markets served by the company. Also, Ahern Rentals' buyout contributed to the growth. Fleet productivity inched up 0.3% and average original equipment costs (“OEC”) increased 15.1% year over year.
On a pro forma basis, rental revenues grew 7.6% year over year, given a 6.9% increase in average OEC and a 2.4% increase in fleet productivity.
Used equipment sales rose 7.1% from a year ago. The Used equipment sales produced an adjusted gross margin of 55.3%, which contracted 630 basis points (bps). This decline stemmed from the anticipated normalization of the used equipment market and the impact of sales of equipment acquired from Ahern Rentals.
Segment Discussion
General Rentals: This segment registered 13.1% year-over-year growth in rental revenues to $2.289 billion. Rental gross margin fell 250 bps year over year to 39.1% due to the impact of higher depreciation expense related to the Ahern Rentals acquisition.
Specialty: Segmental rental revenues increased 14.6% year over year to $830 million. Rentals’ gross margin contracted 210 bps on a year-over-year basis to 47.2%. This was due to a higher proportion of certain lower-margin ancillary revenues and increases in certain operating expenses.
Margins
The company’s total equipment rentals’ gross margin declined 230 bps year over year to 41.3%.
Adjusted EBITDA for the reported period grew 9.8% year over year to $1.809 billion. However, the adjusted EBITDA margin decreased 150 bps to 48.5%.
2023 Highlights
For the full year, the company generated total revenues of $14.332 billion (up 23.1%) and adjusted earnings of $40.74 per share (up 25.4% from 2022).
Adjusted EBITDA rose 22.1%, but adjusted EBITDA margin contracted 50 bps to 47.8% year over year.
Balance Sheet
United Rentals had cash and cash equivalents of $363 million as of Dec 31, 2023, up from $106 million at 2022-end. Total liquidity was $3.33 billion at 2023-end. Long-term debt at the fourth quarter of 2023-end was $10.1 billion, down from $11.21 billion at 2022-end.
On Dec 31, 2023, the net leverage ratio was 1.6x compared with 2.0x on Dec 31, 2022. Return on invested capital increased 90 bps year over year to 13.6% for the trailing 12 months ended on Dec 31, 2023.
During 2023, cash from operating activities improved 6.1% year over year to $4.704 billion. Free cash flow grew 30.7% year over year to $2.306 billion for the said period.
2024 Guidance
Total revenues are expected to be in the range of $14.65-$15.15 billion. Adjusted EBITDA is projected to be between $6.9 billion and $7.15 billion, indicating an increase from $6.857 billion in 2023.
Net rental capital expenditure is projected to be in the range of $1.9-$2.2 billion after gross purchases of $3.4-$3.7 billion versus $1.934 billion after gross purchases of $3.508 billion in 2023.
Net cash provided by operating activities is anticipated to be in the range of $4.15-$4.75 billion.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected to be in the range of $2-$2.2 billion versus $2.314 billion in 2023.
Zacks Rank
Currently, URI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Few Recent Construction Releases
D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2024 (ended Dec 31, 2023) results, wherein earnings missed the Zacks Consensus Estimate, but revenues surpassed the same.
On a year-over-year basis, both the top and bottom lines increased. The upside was backed by the supply of both new and existing homes as affordable price points remain limited and robust housing demand is supported by favorable demographics amid elevated inflation and mortgage/interest rates.
KB Home (KBH - Free Report) reported better-than-expected results in fourth-quarter fiscal 2023 (ended Nov 30, 2023). Both the earnings and revenues beat the Zacks Consensus Estimate. With this, the company’s earnings and revenues surpassed the consensus mark in four consecutive quarters.
Looking forward to the first quarter and the entirety of 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.
Acuity Brands, Inc. (AYI - Free Report) reported impressive results in first-quarter fiscal 2024 (ending Nov 30, 2023), with earnings and revenues surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 15th consecutive quarter.
Despite a year-over-year decline in sales in the lighting business, AYI reported strong fiscal first-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.