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United Rentals (URI) to Buy Yak, Diversifies Specialty Business
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United Rentals, Inc. (URI - Free Report) announced its acquisition of Yak Access, LLC, Yak Mat, LLC, and New South Access & Environmental Solutions, LLC, collectively known as "Yak," from Platinum Equity for approximately $1.1 billion in cash. Expected to close in the first quarter of 2024, the move diversifies URI's Specialty business offerings, enhancing shareholder returns and positioning the company as a one-stop shop for customers.
Shares of United Rentals gained 1.7% during the trading session on Mar 4, 2024.
United Rentals’ acquisition of Yak creates a new "Matting Solutions" business, tapping into a large and growing market segment. This aligns with URI's strategy of differentiation and one-stop-shop capabilities.
Immediate cross-sell opportunities arise across construction and maintenance, repair, and operations applications, leveraging United Rentals’ existing customer base.
Culturally, Yak shares United Rentals’ customer-first approach, fostering long-term relationships and prioritizing safety.
Image Source: Zacks Investment Research
Financial Impact
United Rentals anticipates significant growth potential in the matting business, particularly in energy and power markets, with public and private investments fueling expansion.
Tax benefits included in the purchase price amount to approximately $166 million in net present value, enhancing the deal's attractiveness.
Cost synergies are expected to result in a $7 million adjusted EBITDA benefit within two years post-closing. The acquisition was priced at 6.4 times the adjusted EBITDA for 2023. However, accounting for tax benefits and cost synergies, the adjusted purchase multiple stands at 5.2 times.
The acquisition is projected to be immediately accretive to earnings per share (EPS) and free cash flow, offering an appealing return profile.
URI expects a pro forma leverage ratio of approximately 1.7 times at closing, well within its target range of 1.5-2.5 times.
Additional Considerations
The transaction structure allows for potential additional cash consideration based on revenue attainment in the first two years post-closing, with a maximum payout of $50 million.
In conclusion, URI's acquisition of Yak Access positions the company for strategic growth, enhancing its market presence and bolstering its financial performance. With strong synergies and a focus on customer value, URI continues its trajectory as an industry leader.
Share Price Performance
Shares of United Rentals have gained 49.9% over the past six months, outperforming the Zacks Building Products – Miscellaneous industry’s 34.3% rise. The company is benefiting from sustained demand in its end markets and the strength of its core rental business. The company sees multi-year tailwinds across infrastructure, manufacturing and energy and power. Given the strength of the present market condition and solid buyouts, URI is well poised for growth in 2024.
Zacks Rank
United Rentals currently carries a Zacks Rank #3 (Hold).
Key Picks
Here are some better-ranked stocks from the Construction sector.
NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
Summit Materials, Inc. (SUM - Free Report) currently sports a Zacks Rank of 1. SUM delivered a trailing four-quarter earnings surprise of 18.2%, on average. The stock has gained 23.9% in the past three months.
The Zacks Consensus Estimate for SUM’s 2024 sales and EPS indicates growth of 78.9% and 34.2%, respectively, from a year ago.
Century Communities, Inc. (CCS - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 49.2%, on average. Shares of CCS have rallied 13.1% in the past three months.
The Zacks Consensus Estimate for CCS’ 2024 sales and EPS indicates a rise of 11.1% and 24.4%, respectively, from the prior-year levels.
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United Rentals (URI) to Buy Yak, Diversifies Specialty Business
United Rentals, Inc. (URI - Free Report) announced its acquisition of Yak Access, LLC, Yak Mat, LLC, and New South Access & Environmental Solutions, LLC, collectively known as "Yak," from Platinum Equity for approximately $1.1 billion in cash. Expected to close in the first quarter of 2024, the move diversifies URI's Specialty business offerings, enhancing shareholder returns and positioning the company as a one-stop shop for customers.
Shares of United Rentals gained 1.7% during the trading session on Mar 4, 2024.
Strategic Advantages: Expanding Specialty Offerings
United Rentals’ acquisition of Yak creates a new "Matting Solutions" business, tapping into a large and growing market segment. This aligns with URI's strategy of differentiation and one-stop-shop capabilities.
Immediate cross-sell opportunities arise across construction and maintenance, repair, and operations applications, leveraging United Rentals’ existing customer base.
Culturally, Yak shares United Rentals’ customer-first approach, fostering long-term relationships and prioritizing safety.
Image Source: Zacks Investment Research
Financial Impact
United Rentals anticipates significant growth potential in the matting business, particularly in energy and power markets, with public and private investments fueling expansion.
Tax benefits included in the purchase price amount to approximately $166 million in net present value, enhancing the deal's attractiveness.
Cost synergies are expected to result in a $7 million adjusted EBITDA benefit within two years post-closing. The acquisition was priced at 6.4 times the adjusted EBITDA for 2023. However, accounting for tax benefits and cost synergies, the adjusted purchase multiple stands at 5.2 times.
The acquisition is projected to be immediately accretive to earnings per share (EPS) and free cash flow, offering an appealing return profile.
URI expects a pro forma leverage ratio of approximately 1.7 times at closing, well within its target range of 1.5-2.5 times.
Additional Considerations
The transaction structure allows for potential additional cash consideration based on revenue attainment in the first two years post-closing, with a maximum payout of $50 million.
In conclusion, URI's acquisition of Yak Access positions the company for strategic growth, enhancing its market presence and bolstering its financial performance. With strong synergies and a focus on customer value, URI continues its trajectory as an industry leader.
Share Price Performance
Shares of United Rentals have gained 49.9% over the past six months, outperforming the Zacks Building Products – Miscellaneous industry’s 34.3% rise. The company is benefiting from sustained demand in its end markets and the strength of its core rental business. The company sees multi-year tailwinds across infrastructure, manufacturing and energy and power. Given the strength of the present market condition and solid buyouts, URI is well poised for growth in 2024.
Zacks Rank
United Rentals currently carries a Zacks Rank #3 (Hold).
Key Picks
Here are some better-ranked stocks from the Construction sector.
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank of 1 (Strong Buy). The stock has gained 20.2% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
Summit Materials, Inc. (SUM - Free Report) currently sports a Zacks Rank of 1. SUM delivered a trailing four-quarter earnings surprise of 18.2%, on average. The stock has gained 23.9% in the past three months.
The Zacks Consensus Estimate for SUM’s 2024 sales and EPS indicates growth of 78.9% and 34.2%, respectively, from a year ago.
Century Communities, Inc. (CCS - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 49.2%, on average. Shares of CCS have rallied 13.1% in the past three months.
The Zacks Consensus Estimate for CCS’ 2024 sales and EPS indicates a rise of 11.1% and 24.4%, respectively, from the prior-year levels.