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United Rentals (URI) Q1 Earnings & Revenues Top, Shares Up
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United Rentals, Inc.’s (URI - Free Report) shares grew 2.4% in the after-hour trading session on Apr 29, post the company reported impressive results in first-quarter 2020. Earnings and revenues topped the respective Zacks Consensus Estimate, and grew on a year-over-year basis. The company suspended its previously provided 2020 guidance and announced certain initiatives in response to the coronavirus outbreak.
Matthew Flannery, chief executive officer of United Rentals, said, “We’re in the strongest position in our history to respond to this crisis and to prepare for the recovery to come. This includes the strength of our balance sheet and cash flow, as we remain focused on disciplined capital allocation and cost management. We expect our free cash flow to remain substantially positive in 2020, even in our worst-case scenarios.”
Inside the Headlines
Adjusted earnings of $3.35 per share topped the consensus estimate of $2.34 by 43.2%. Also, the reported figure increased 1.2% from the prior-year figure. Total revenues of $2.125 billion surpassed the consensus mark of $2.051 billion by 3.6% and grew 0.4% year over year.
United Rentals, Inc. Price, Consensus and EPS Surprise
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 0.7% from the year-ago quarter. In February, the company’s revenues were slightly higher on a year-over-year basis. However, March sales declined primarily due to the impact of COVID-19.
Fleet productivity was also down 1.2% year over year in the quarter. Rental volume declined due to shelter-in-place orders and other end-market restrictions in March.
Used equipment sales generated $208 million of proceeds in the quarter compared with $192 million a year ago. Adjusted gross margin of 45.7% contracted 330 basis points (bps) due to changes in the mix of equipment sold, channel mix and pricing.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues fell 2% year over year to $1.39 billion. Rental gross margin contracted 310 bps year over year to 32.1%, owing to increased depreciation expenses due to a $24 million non-cash asset impairment charge, and higher operating costs.
Trench, Power and Pump/Specialty: Segmental rental revenues increased 4.6% year over year to $389 million, driven by 2.8% organic growth. The upside was mainly driven by 9.8% increase in average original equipment cost, partially offset by the impact of COVID-19. However, rentals gross margin declined 60 bps on a year-over-year basis to 41.6% due to higher operating costs, largely associated with COVID-19.
Margins
The company’s total equipment rentals gross margin dropped 250 bps year over year to 34.2%.
Adjusted EBITDA also dropped 0.7% from the prior-year quarter to $915 million. Adjusted EBITDA margin contracted 40 bps to 43.1% in the quarter.
Balance Sheet
United Rentals had cash and cash equivalents of $513 million as of Mar 31, 2020 compared with $52 million at 2019-end. Total liquidity was $3.083 billion at the quarter-end, up $940 million from the prior-year comparable period.
Net leverage ratio was 2.5 as of Mar 31, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $292 million year to date. The company has no long-term debt maturities until 2025.
Cash from operating activities decreased 3.4% to $644 million and free cash flow rose 5.4% from the prior-year quarter to $606 million.
On Jan 28, 2020, the board of directors authorized a new $500-million share repurchase program. Until Mar 18, it had repurchased $257 million common stock under the repurchase program. The company announced that it has paused further buyback for an indefinite period as of the same date.
2020 Guidance Revoked
Owing to uncertainty of the economic disruption caused by COVID-19, the company has withdrawn its full-year 2020 financial guidance.
Nonetheless, the company has undertaken various initiatives to mitigate the impact of COVID-19 on end-markets served. It currently focuses on five key work streams that include ensuring employee safety and well-being; leveraging competitive advantages to support the needs of customers; managing capital expenditures and fleet capacity; controlling core operating expenses; and maintaining ample liquidity to meet the business needs.
Zacks Rank & Peer Release
United Rentals — which shares space with Owens Corning (OC - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #4 (Sell).
Masco Corporation’s (MAS - Free Report) first-quarter 2020 earnings and revenues handily beat the Zacks Consensus Estimate and improved year over year, courtesy of strong contributions from North American plumbing products as well as paint and other coatings products.
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United Rentals (URI) Q1 Earnings & Revenues Top, Shares Up
United Rentals, Inc.’s (URI - Free Report) shares grew 2.4% in the after-hour trading session on Apr 29, post the company reported impressive results in first-quarter 2020. Earnings and revenues topped the respective Zacks Consensus Estimate, and grew on a year-over-year basis. The company suspended its previously provided 2020 guidance and announced certain initiatives in response to the coronavirus outbreak.
Matthew Flannery, chief executive officer of United Rentals, said, “We’re in the strongest position in our history to respond to this crisis and to prepare for the recovery to come. This includes the strength of our balance sheet and cash flow, as we remain focused on disciplined capital allocation and cost management. We expect our free cash flow to remain substantially positive in 2020, even in our worst-case scenarios.”
Inside the Headlines
Adjusted earnings of $3.35 per share topped the consensus estimate of $2.34 by 43.2%. Also, the reported figure increased 1.2% from the prior-year figure. Total revenues of $2.125 billion surpassed the consensus mark of $2.051 billion by 3.6% and grew 0.4% year over year.
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 0.7% from the year-ago quarter. In February, the company’s revenues were slightly higher on a year-over-year basis. However, March sales declined primarily due to the impact of COVID-19.
Fleet productivity was also down 1.2% year over year in the quarter. Rental volume declined due to shelter-in-place orders and other end-market restrictions in March.
Used equipment sales generated $208 million of proceeds in the quarter compared with $192 million a year ago. Adjusted gross margin of 45.7% contracted 330 basis points (bps) due to changes in the mix of equipment sold, channel mix and pricing.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues fell 2% year over year to $1.39 billion. Rental gross margin contracted 310 bps year over year to 32.1%, owing to increased depreciation expenses due to a $24 million non-cash asset impairment charge, and higher operating costs.
Trench, Power and Pump/Specialty: Segmental rental revenues increased 4.6% year over year to $389 million, driven by 2.8% organic growth. The upside was mainly driven by 9.8% increase in average original equipment cost, partially offset by the impact of COVID-19. However, rentals gross margin declined 60 bps on a year-over-year basis to 41.6% due to higher operating costs, largely associated with COVID-19.
Margins
The company’s total equipment rentals gross margin dropped 250 bps year over year to 34.2%.
Adjusted EBITDA also dropped 0.7% from the prior-year quarter to $915 million. Adjusted EBITDA margin contracted 40 bps to 43.1% in the quarter.
Balance Sheet
United Rentals had cash and cash equivalents of $513 million as of Mar 31, 2020 compared with $52 million at 2019-end. Total liquidity was $3.083 billion at the quarter-end, up $940 million from the prior-year comparable period.
Net leverage ratio was 2.5 as of Mar 31, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $292 million year to date. The company has no long-term debt maturities until 2025.
Cash from operating activities decreased 3.4% to $644 million and free cash flow rose 5.4% from the prior-year quarter to $606 million.
On Jan 28, 2020, the board of directors authorized a new $500-million share repurchase program. Until Mar 18, it had repurchased $257 million common stock under the repurchase program. The company announced that it has paused further buyback for an indefinite period as of the same date.
2020 Guidance Revoked
Owing to uncertainty of the economic disruption caused by COVID-19, the company has withdrawn its full-year 2020 financial guidance.
Nonetheless, the company has undertaken various initiatives to mitigate the impact of COVID-19 on end-markets served. It currently focuses on five key work streams that include ensuring employee safety and well-being; leveraging competitive advantages to support the needs of customers; managing capital expenditures and fleet capacity; controlling core operating expenses; and maintaining ample liquidity to meet the business needs.
Zacks Rank & Peer Release
United Rentals — which shares space with Owens Corning (OC - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the same industry — currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Masco Corporation’s (MAS - Free Report) first-quarter 2020 earnings and revenues handily beat the Zacks Consensus Estimate and improved year over year, courtesy of strong contributions from North American plumbing products as well as paint and other coatings products.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>