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United Rentals (URI) Up 0.3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for United Rentals (URI - Free Report) . Shares have added about 0.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Rentals due for a pullback? 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 drivers.
United Rentals Beats Q3 Earnings & Revenue Estimates
United Rentals’ third-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate and also improved year over year. The upside can be attributed to strong gains in volume, margins and rates.
Adjusted earnings of $4.74 per share beat the Zacks Consensus Estimate of $4.54 and also surged 45.8% from the prior-year level.
Revenues
Total revenues of $2.12 billion surpassed the consensus mark of $2.02 billion by 4.9%. Revenues also 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%.
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 BakerCorp acquisition, as well as 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 the 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 bps year over year to 70.9%, due of the impact of 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 on Dec 31, 2017. The age of the rental fleet was 46.6 months on an OEC-weighted basis as of Sep 30, 2018 compared with 47 months on Dec 31, 2017.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $65 million as of Sep 30, 2018 compared with $352 million on 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 in the first nine months of 2018 compared with $582 million in the year-ago period.
Share Repurchase Program
United Rentals has put its $1.25-billion share repurchase program on hold due to the BlueLine acquisition, as well as ongoing plans to integrate its operations and assess other potential uses of capital. 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 guided range of $3.715-$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-$1.4 billion projected earlier.
Guidance Revised Post BlueLine Buyout
The company revised its 2018 guidance by adding $120 million of total revenues and $50 million of adjusted EBITDA to the prior expectation, to account for the impact of the BlueLine acquisition.
The company now expects total revenues in the range of $7.89-$7.99 billion compared with the prior guidance of $7.77-$7.87 billion. Adjusted EBITDA is now anticipated in the range of $3.815-$3.865 billion, up from the prior guidance of $3.765-$3.815 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, United Rentals has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, United Rentals has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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United Rentals (URI) Up 0.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for United Rentals (URI - Free Report) . Shares have added about 0.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Rentals due for a pullback? 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 drivers.
United Rentals Beats Q3 Earnings & Revenue Estimates
United Rentals’ third-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate and also improved year over year. The upside can be attributed to strong gains in volume, margins and rates.
Adjusted earnings of $4.74 per share beat the Zacks Consensus Estimate of $4.54 and also surged 45.8% from the prior-year level.
Revenues
Total revenues of $2.12 billion surpassed the consensus mark of $2.02 billion by 4.9%. Revenues also 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%.
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 BakerCorp acquisition, as well as 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 the 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 bps year over year to 70.9%, due of the impact of 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 on Dec 31, 2017. The age of the rental fleet was 46.6 months on an OEC-weighted basis as of Sep 30, 2018 compared with 47 months on Dec 31, 2017.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $65 million as of Sep 30, 2018 compared with $352 million on 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 in the first nine months of 2018 compared with $582 million in the year-ago period.
Share Repurchase Program
United Rentals has put its $1.25-billion share repurchase program on hold due to the BlueLine acquisition, as well as ongoing plans to integrate its operations and assess other potential uses of capital. 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 guided range of $3.715-$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-$1.4 billion projected earlier.
Guidance Revised Post BlueLine Buyout
The company revised its 2018 guidance by adding $120 million of total revenues and $50 million of adjusted EBITDA to the prior expectation, to account for the impact of the BlueLine acquisition.
The company now expects total revenues in the range of $7.89-$7.99 billion compared with the prior guidance of $7.77-$7.87 billion. Adjusted EBITDA is now anticipated in the range of $3.815-$3.865 billion, up from the prior guidance of $3.765-$3.815 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, United Rentals has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, United Rentals has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.