It has been about a month since the last earnings report for United Rentals, Inc. (URI - Free Report) . Shares have lost about 5.8% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is URI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First Quarter 2018 Results
United Rentals’ first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate and increased from the prior-year quarter, owing to changes in tax laws and higher rental revenues.
Adjusted earnings of $2.87 per share beat the Zacks Consensus Estimate of $2.38 and surged 76% from the prior-year quarter’s figure.
Total revenues of $1.73 billion surpassed the Zacks Consensus Estimate of $1.66 billion by 4.2%. Revenues rose 27.9% year over year.
Rental revenues were up 25.1% from the year-ago quarter to $1.46 billion. Volume of equipment on rent increased 26.1%, while rental rates inched up 1.9%.
Total equipment rentals gross margin contracted 70 bps year over year to 37.4%.
Adjusted EBITDA improved 32% year over year to $780 million. Adjusted EBITDA margin increased 140 bps to 45% in the quarter.
General Rentals: Segment rental revenues increased 22.9% year over year to $1.2 billion. Segment equipment rentals’ gross profit rose 18.3% to $426 million. However, gross margin declined 130 bps year over year.
Trench, Power and Pump: Segmental rental revenues increased 36.5% year over year to $258 million, primarily on a same-store basis. Equipment rentals gross profit rose 41.7% to $119 million, while gross margin improved 170 bps on a year-over-year basis.
Time Utilization & Fleet Size
Time utilization declined 80 bps to 65.2% from the year-ago quarter’s level, owing to the impact of the NES and Neff acquisitions.
The size of the rental fleet was $11.4 billion of original equipment cost (OEC) as of Mar 31, compared with $11.5 billion as of Dec 31, 2017. The age of the rental fleet was 47.5 months on an OEC-weighted basis as of Mar 31, compared with 47 months as of Dec 31, 2017.
United Rentals’ cash and cash equivalents totaled $278 million as of Mar 31, compared with $352 million as of Dec 31, 2017.
In the quarter under review, the company generated $642 million of net cash from operating activities compared with $622 million in the prior-year quarter.
Free cash flow was $516 million for the first three months of 2018, compared with $490 million in the year-ago period.
Share Repurchase Program
United Rentals authorized a new $1.25-billion share repurchase program which will begin when the current program is complete. As of March 31, the company had completed $832 million of repurchases under the current program, which it intends to complete by mid-2018.
Reiterated 2018 Guidance
Total revenues are expected in the range of $7.3-$7.6 billion, reflecting an increase from $6.64 billion reported in 2017.
Adjusted EBITDA is projected between $3.60 billion and $3.75 billion, higher than the prior-year quarter’s adjusted EBITDA of $3.16 billion.
Net rental capital expenditures after gross purchases are projected in the range of $1.2-$1.35 billion.
Net cash provided by operating activities is expected in the range of $2.625-$2.825 billion, higher than $2.230 billion reported in 2017.
Free cash flow is expected in the range of $1.3-$1.4 billion, higher than $983 million reported in 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.
At this time, URI has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregtae VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise URI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.