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United Rentals' (URI) Shares Fall Despite Q3 Earnings Beat
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United Rentals’ (URI - Free Report) third-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year. The upside can be attributed to strong gains in volume, margins and rates. However, shares plunged more than 4% in the after-hour trading session, following the earnings release after the equipment rental company said its enhanced outlook did not include a pending acquisition.
Adjusted earnings of $4.74 per share beat the Zacks Consensus Estimate of $4.54 and surged 45.8% from the prior-year quarter’s tally.
Revenues
Total revenues of $2.12 billion surpassed the consensus mark of $2.02 billion by 4.9%. Revenues rose 19.8% year over year.
Rental revenues were also up 21.2% from the year-ago quarter to $1.86 billion. Volume of equipment on rent increased 17.8% and rental rates rose 2.1%.
United Rentals, Inc. Price, Consensus and EPS Surprise
General Rentals: Segment equipment rentals’ revenues increased 16.7% year over year to $1.44 billion. Segment equipment rentals’ gross profit rose 19.8% to $629 million. Also, gross margin expanded 120 bps year over year.
Trench, Power and Pump: Segmental equipment rentals revenues increased 39.5% year over year to $417 million. Equipment rentals gross profit rose 32.9% to $218 million, while gross margin declined 250 bps on a year-over-year basis.The downside was mainly due to the impact of the BakerCorp acquisition and an increase in lower-margin fuel revenues primarily within the Power and HVAC region.
Overall Margins
The company’s total equipment rentals gross margin contracted 60 bps year over year to 45.5% as higher margins from General Rentals segment were offset by the weak performance of the Trench, Power and Fluid Solutions segment.
Adjusted EBITDA increased 20.5% to $1,059 million. Adjusted EBITDA margin expanded 20 bps to 50% in the quarter.
Time Utilization & Fleet Size
Time utilization was down 100 basis points (bps) year over year to 70.9% due of the impact of the Neff and BakerCorp acquisitions. On a pro forma basis, time utilization decreased 10 bps year over year to 70.7%.
The size of the rental fleet was $12.90 billion of original equipment cost ("OEC") as of Sep 30, 2018 compared with $11.51 billion as of Dec 31, 2017. The age of the rental fleet was 46.6 months on an OEC-weighted basis as of Sep 30 compared with 47 months as of Dec 31, 2017.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $65 million as of Sep 30 compared with $352 million as of Dec 31, 2017.
In the first nine months of 2018, the company generated $2.1 billion of net cash from operating activities compared with $1.8 billion in the prior-year period.
Free cash flow was $536 million for the first nine months of 2018 compared with $582 million in the year-ago period.
Share Repurchase Program
In July, United Rentals initiated its $1.25-billion program to repurchase shares of its common stock, which the company intends to pause following the completion of the pending BlueLine acquisition. As of Sep 30, 2018, the company repurchased $210 million of common stock under the program.
Guidance Improved
Total revenues are expected in the range of $7.77-$7.87 billion, up from the prior projection of $7.64-$7.84 billion. This reflects an increase from $6.64 billion in 2017.
Adjusted EBITDA is projected between $3.765 billion and $3.815 billion, higher than the previous guidance of $3.715 billion-$3.815 billion.
Net rental capital expenditures after gross purchases are projected in the range of $1.35-$1.45 billion compared with $1.3-$1.4 billion expected earlier.
Net cash provided by operating activities is maintained in the range of $2.725-$2.825 billion.
Free cash flow is expected in the range of $1.25-$1.35 billion, compared with $1.3 billion-$1.4 billion expected earlier.
Owens Corning (OC - Free Report) is slated to report quarterly results on Oct 24. The Zacks Consensus Estimate for earnings is pegged at $1.71, indicating a rise of 11.1% year over year.
Armstrong World Industries, Inc. (AWI - Free Report) is slated to report quarterly results on Oct 29. The Zacks Consensus Estimate for earnings is pegged at $1.18, indicating a rise of 37.2% year over year.
Masco Corporation (MAS - Free Report) is scheduled to release quarterly results on Oct 30. The Zacks Consensus Estimate for earnings is pegged at 70 cents, reflecting an increase of 40% year over year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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United Rentals' (URI) Shares Fall Despite Q3 Earnings Beat
United Rentals’ (URI - Free Report) third-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year. The upside can be attributed to strong gains in volume, margins and rates. However, shares plunged more than 4% in the after-hour trading session, following the earnings release after the equipment rental company said its enhanced outlook did not include a pending acquisition.
Adjusted earnings of $4.74 per share beat the Zacks Consensus Estimate of $4.54 and surged 45.8% from the prior-year quarter’s tally.
Revenues
Total revenues of $2.12 billion surpassed the consensus mark of $2.02 billion by 4.9%. Revenues rose 19.8% year over year.
Rental revenues were also up 21.2% from the year-ago quarter to $1.86 billion. Volume of equipment on rent increased 17.8% and rental rates rose 2.1%.
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. Price, Consensus and EPS Surprise | United Rentals, Inc. Quote
Segment Discussion
General Rentals: Segment equipment rentals’ revenues increased 16.7% year over year to $1.44 billion. Segment equipment rentals’ gross profit rose 19.8% to $629 million. Also, gross margin expanded 120 bps year over year.
Trench, Power and Pump: Segmental equipment rentals revenues increased 39.5% year over year to $417 million. Equipment rentals gross profit rose 32.9% to $218 million, while gross margin declined 250 bps on a year-over-year basis.The downside was mainly due to the impact of the BakerCorp acquisition and an increase in lower-margin fuel revenues primarily within the Power and HVAC region.
Overall Margins
The company’s total equipment rentals gross margin contracted 60 bps year over year to 45.5% as higher margins from General Rentals segment were offset by the weak performance of the Trench, Power and Fluid Solutions segment.
Adjusted EBITDA increased 20.5% to $1,059 million. Adjusted EBITDA margin expanded 20 bps to 50% in the quarter.
Time Utilization & Fleet Size
Time utilization was down 100 basis points (bps) year over year to 70.9% due of the impact of the Neff and BakerCorp acquisitions. On a pro forma basis, time utilization decreased 10 bps year over year to 70.7%.
The size of the rental fleet was $12.90 billion of original equipment cost ("OEC") as of Sep 30, 2018 compared with $11.51 billion as of Dec 31, 2017. The age of the rental fleet was 46.6 months on an OEC-weighted basis as of Sep 30 compared with 47 months as of Dec 31, 2017.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $65 million as of Sep 30 compared with $352 million as of Dec 31, 2017.
In the first nine months of 2018, the company generated $2.1 billion of net cash from operating activities compared with $1.8 billion in the prior-year period.
Free cash flow was $536 million for the first nine months of 2018 compared with $582 million in the year-ago period.
Share Repurchase Program
In July, United Rentals initiated its $1.25-billion program to repurchase shares of its common stock, which the company intends to pause following the completion of the pending BlueLine acquisition. As of Sep 30, 2018, the company repurchased $210 million of common stock under the program.
Guidance Improved
Total revenues are expected in the range of $7.77-$7.87 billion, up from the prior projection of $7.64-$7.84 billion. This reflects an increase from $6.64 billion in 2017.
Adjusted EBITDA is projected between $3.765 billion and $3.815 billion, higher than the previous guidance of $3.715 billion-$3.815 billion.
Net rental capital expenditures after gross purchases are projected in the range of $1.35-$1.45 billion compared with $1.3-$1.4 billion expected earlier.
Net cash provided by operating activities is maintained in the range of $2.725-$2.825 billion.
Free cash flow is expected in the range of $1.25-$1.35 billion, compared with $1.3 billion-$1.4 billion expected earlier.
Zacks Rank
United Rentals carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Peer Releases
Owens Corning (OC - Free Report) is slated to report quarterly results on Oct 24. The Zacks Consensus Estimate for earnings is pegged at $1.71, indicating a rise of 11.1% year over year.
Armstrong World Industries, Inc. (AWI - Free Report) is slated to report quarterly results on Oct 29. The Zacks Consensus Estimate for earnings is pegged at $1.18, indicating a rise of 37.2% year over year.
Masco Corporation (MAS - Free Report) is scheduled to release quarterly results on Oct 30. The Zacks Consensus Estimate for earnings is pegged at 70 cents, reflecting an increase of 40% year over year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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