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Industrial Demand to Aid United Rentals’ (URI) Q3 Earnings


United Rentals, Inc. URI is scheduled to report third-quarter 2018 results on Oct 17, after the market closes.

Overall, United Rentals is expected to witness robust growth in the soon-to-be-reported quarter, courtesy of strength in non-residential construction activity, particularly in the commercial and infrastructure sectors, along with the a rebound in industrial activity.

Let’s delve into other factors that are likely to drive the company’s results in the third quarter.

Strong Industrial Activity to Boost Revenues: United Rentals has been benefiting from robust demand across construction and industrial verticals in the United States, as well as Canada. This is evident from its solid top-line growth (up 22.6% in the first six months of 2018), given strong gains in volume and rates.

The company has been reporting positive rental rates since the beginning of 2018, after witnessing several quarters of negative rates. We expect the third-quarter results to reflect positive rental rates as well. Factors such as strong organic growth, led by improving end-market demand and acquisitions, are likely to help the company record an improvement in rates.

Equipment Rentals, comprising about 83.8% of total revenues, is expected to get a boost in the third quarter. The Zacks Consensus Estimate for Equipment Rentals revenues of $1.76 billion reflects sequential growth of 7.6% and a year-over-year rise of 14.3%. The consensus estimate for rental equipment sales is $144 million, indicating an increase of 3.6% from the prior-year quarter. Sales of new equipment are expected to increase 10.5% on a year-over-year basis. Contractor Supplies sales will likely grow 5% year over year, and Service and Other revenues are expected to be up 26.3%.

Solid Inorganic Strategy to Aid Top Line: Notably, United Rentals follows systematic inorganic strategies to expand its geographic borders and product portfolio. Acquisition of BakerCorp and Industrial Rental Services in July and March, respectively, along with its earlier buyouts of Neff Corporation and NES Rentals in 2017 are expected to contribute to its growth.

Overall, analysts polled by Zacks expect revenues of $2.02 billion in the third quarter, depicting an increase of 14.2% from the year-ago figure.

Cost-Saving Efforts to Boost Bottom Line: Apart from strong demand, Project XL initiatives (set of eight specific work streams to drive growth through revenue opportunities and generate profits via cost savings), prudent investments in fleet, accretive acquisitions and robust demand work in favor of the company.

The consensus estimate for earnings is pegged at $4.62 per share, implying 42.2% year-over-year growth.

United Rentals, Inc. Price and EPS Surprise

United Rentals, Inc. Price and EPS Surprise | United Rentals, Inc. Quote

What Does the Zacks Model Unveil?

Our proven model does not show that United Rentals is likely to beat earnings estimates in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

United Rentals has an Earnings ESP of -6.32% and a Zacks Rank #2, which make surprise prediction difficult. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

PulteGroup, Inc. PHM has an Earnings ESP of +7.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is slated to report quarterly results on Oct 23.

The Sherwin-Williams Company SHW has an Earnings ESP of +1.27% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Oct 25.

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +5.25% and a Zacks Rank #3. The company is expected to report quarterly numbers on Nov 20.

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