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United Rentals (URI) Beats Q1 Earnings, Updates 2017 View

Zacks

United Rentals Inc.’s URI first-quarter 2017 adjusted earnings of $1.63 per share beat the Zacks Consensus Estimate of $1.58 by 3.2%. Earnings also increased 16.4% year over year.

The company reported solid volume growth and record time utilization, driven by strength in its core construction markets. Positive trends in the upstream oil and gas business also drove the upside.

Revenues

Total revenue of $1.36 billion surpassed the Zacks Consensus Estimate of $1.34 billion by 1.5%. Revenues increased 3.8% year over year.

For the first quarter of 2017, rental revenues were $1.17 billion, up 4.5% from the year-ago quarter. Volume of equipment on rent increased 7% while rental rates fell 1.4%.

Segment Discussion

General Rentals: Segment rental revenues increased 2.3% year over year to $977 million. Segment equipment rentals’ gross profit inched up 0.8% to $360 million.

Trench, Power and Pump: The company’s Trench, Power and Pump specialty segment's rental revenues rose 16.7% year over year to $189 million, primarily on a same-store basis. Segment equipment rentals’ gross profit rose 23.5% to $84 million.

Time Utilization & Fleet Size

Time utilization increased 190 basis points year over year to 66%, marking a record first quarter for the company.

The size of the rental fleet was $8.92 billion of original equipment cost as of Mar 31, 2017, compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 45.9 months on an OEC-weighted basis as of Mar 31, 2017, compared with 45.2 months as of Dec 31, 2016.

Margins

Total equipment rentals gross margin expanded 10 basis points (bps) year over year to 38.1%.

General Rentals equipment rentals’ gross margin decreased 60 bps to 36.8% while that for Trench, Power and Pump expanded 240 bps to 44.4%.

Adjusted EBITDA was $591 million, compared with $584 million in the prior-year quarter. Adjusted EBITDA margin was 43.6%, down 100 bps from the prior-year quarter.

Balance Sheet

United Rentals’ cash and cash equivalents totaled $337 million as of Mar 31, 2017, compared with $312 million as of Dec 31, 2016.

In the quarter, the company generated $623 million of net cash from operating activities, compared with $604 million for the same period last year. Free cash flow was $490 million, less than $627 million reported in the prior-year quarter.

2017 Guidance Updated

The company updated its 2017 outlook following the acquisition of NES Rentals.

Total revenue is now expected in the $6.05 billion to $6.25 billion range, higher than the prior $5.75 billion to $5.95 billion range. The Zacks Consensus Estimate for 2017 revenues stands at $6.18 billion.

Adjusted EBITDA is projected between $2.835 billion and $2.985 billion, compared to the prior expectation of $2.7 billion to $2.85 billion.

Net rental capital expenditures after gross purchases are likely to be $925 million to $1.7 billion, higher than $750 million reported in 2016 and the prior expectation of $900 million to $1.05 billion.

Net cash provided by operating activities is expected in the $1.85 billion to $2.05 billion range, more than $1.675 billion to $1.875 billion expected earlier.

Free cash flow is expected in the $800 million to $900 million range, higher than $650 million to $750 million expected previously.

United Rentals, Inc. Price, Consensus and EPS Surprise


Zacks Rank

United Rentals currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Upcoming Releases in the Construction Sector

Masco Corporation MAS is slated to release its quarterly results on Apr 25. The Zacks Consensus Estimate for earnings is pegged at 36 cents, an increase of 11.3% year over year.

PulteGroup, Inc. PHM is slated to release its quarterly results on Apr 25. The Zacks Consensus Estimate for earnings is pegged at 28 cents, an increase of 16.7% on a year-over-year basis.

Louisiana-Pacific Corp. LPX is scheduled to release its quarterly numbers on May 5. The Zacks Consensus Estimate for earnings is pegged at 29 cents, an increase of 319.1% on a year-over-year basis.

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