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Infrastructural Deal to Aid United Rentals (URI) Amid Concerns
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United Rentals, Inc. (URI - Free Report) is making the most of the high demand for specialty construction products, used equipment and mixed bag of rental fleets. Business acquisitions are also an important part of its growth strategy.
However, slowdown in the upstream business remains a cause of concern. That said, the recent announcement of President Joe Biden’s infrastructure plan is opening up opportunities for construction-related companies like United Rentals.
Its shares have gained 116% over the past year versus the Zacks Building Products - Miscellaneous industry’s 51.6% growth. Shares of this equipment rental company have outperformed the broader construction sector over the said time frame. Further, upward revision of earnings estimates for 2021 indicates analysts’ confidence in United Rentals’ potential. Over the past 60 days, the Zacks Consensus Estimate for its 2021 earnings has risen 7.1% to $21.07 per share. This signifies analysts’ positive sentiments. Also, it has an outstanding earnings and revenue surprise trend. Its earnings exceeded the consensus mark in 29 of the last 31 quarters.
Biden’s Infrastructural Deal: Recently, President Biden hailed a much-awaited bipartisan agreement on a $973-billion infrastructure plan over five years. The plan will have $579 billion in new spending over the next five years, which could open the door to the president’s momentous $4 trillion proposals later on. Biden administration’s endeavor to pump money into rebuilding the nation's roads, bridges, and other infrastructure would give construction companies like United Rentals and others a solid foundation for growth.
Solid End-Market Demand: United Rentals serves the following three principal end markets for equipment rental in North America — industrial and other non-construction, commercial construction as well as residential construction. For first-quarter 2021, equipment rentals represented 81% of the company’s total revenues. There has been a return of activity in United Rentals’ manufacturing sector after more than a year of industrial recession.
The construction verticals, which have been the most resilient amid the COVID-19 pandemic, are still going strong. In terms of end market, solid activity was witnessed in power, HVAC, pharma, biotech, warehousing, distribution, data center and hospitals. Non-residential construction (the company’s largest revenue base) has been registering improvement of late. United Rentals has been witnessing rising demand for specialty construction products, which are significantly contributing to trench, power and fluid solutions segment’s revenues. Also, the demand for used equipment remained solid, post the easing of pandemic-led restrictions.
Moreover, used equipment sales were stronger than expected for first-quarter 2021. The metric came in at $267 million, reflecting an increase of 28% year over year, driven almost entirely by an increase in retail sales. Strength of the used equipment market is a key indicator of the rental industry performance.
Expansion Via Acquisitions: United Rentals is expanding geographic borders and the product portfolio through acquisitions as well as joint ventures. On Apr 15, 2021, the company entered into an Agreement and Plan of Merger (the "GFN Merger Agreement") to acquire General Finance for $19 per share in cash, representing a total enterprise value of approximately $996 million, including the assumption of $400 million of net debt. General Finance — which operates as Pac-Van and Container King in the United States and Canada, and as Royal Wolf in Australia and New Zealand — is a leading provider of mobile storage as well as modular office space.
Superior ROE: United Rentals’ return on equity (ROE) is indicative of growth potential. The company’s ROE of 29.4% compares favorably with the industry average of 10.5%, implying that it is efficient in using shareholders’ funds.
Headwinds
Slowdown in the upstream business is a cause of concern for United Rentals. Demand for its services and products is sensitive to the level of exploration, development, and production activity of oil and natural gas companies. The level of exploration, development and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile and are likely to continue to be so. Notably, the company is experiencing a slowdown in upstream oil and gas operations.
Key Picks
Some better-ranked stocks in the same industry include GCP Applied Technologies Inc. , Advanced Drainage Systems, Inc. (ROAD - Free Report) and Owens Corning Inc. (OC - Free Report) , each carrying a Zacks Rank #2 (Buy).
GCP Applied Technologies, Advanced Drainage and Owens Corning’s earnings for 2021 are expected to increase 15.1%, 66% and 54.3%, respectively.
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Infrastructural Deal to Aid United Rentals (URI) Amid Concerns
United Rentals, Inc. (URI - Free Report) is making the most of the high demand for specialty construction products, used equipment and mixed bag of rental fleets. Business acquisitions are also an important part of its growth strategy.
However, slowdown in the upstream business remains a cause of concern. That said, the recent announcement of President Joe Biden’s infrastructure plan is opening up opportunities for construction-related companies like United Rentals.
Its shares have gained 116% over the past year versus the Zacks Building Products - Miscellaneous industry’s 51.6% growth. Shares of this equipment rental company have outperformed the broader construction sector over the said time frame. Further, upward revision of earnings estimates for 2021 indicates analysts’ confidence in United Rentals’ potential. Over the past 60 days, the Zacks Consensus Estimate for its 2021 earnings has risen 7.1% to $21.07 per share. This signifies analysts’ positive sentiments. Also, it has an outstanding earnings and revenue surprise trend. Its earnings exceeded the consensus mark in 29 of the last 31 quarters.
Let’s take a look at the factors supporting growth of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Major Growth Drivers
Biden’s Infrastructural Deal: Recently, President Biden hailed a much-awaited bipartisan agreement on a $973-billion infrastructure plan over five years. The plan will have $579 billion in new spending over the next five years, which could open the door to the president’s momentous $4 trillion proposals later on. Biden administration’s endeavor to pump money into rebuilding the nation's roads, bridges, and other infrastructure would give construction companies like United Rentals and others a solid foundation for growth.
Solid End-Market Demand: United Rentals serves the following three principal end markets for equipment rental in North America — industrial and other non-construction, commercial construction as well as residential construction. For first-quarter 2021, equipment rentals represented 81% of the company’s total revenues. There has been a return of activity in United Rentals’ manufacturing sector after more than a year of industrial recession.
The construction verticals, which have been the most resilient amid the COVID-19 pandemic, are still going strong. In terms of end market, solid activity was witnessed in power, HVAC, pharma, biotech, warehousing, distribution, data center and hospitals. Non-residential construction (the company’s largest revenue base) has been registering improvement of late. United Rentals has been witnessing rising demand for specialty construction products, which are significantly contributing to trench, power and fluid solutions segment’s revenues. Also, the demand for used equipment remained solid, post the easing of pandemic-led restrictions.
Moreover, used equipment sales were stronger than expected for first-quarter 2021. The metric came in at $267 million, reflecting an increase of 28% year over year, driven almost entirely by an increase in retail sales. Strength of the used equipment market is a key indicator of the rental industry performance.
Expansion Via Acquisitions: United Rentals is expanding geographic borders and the product portfolio through acquisitions as well as joint ventures. On Apr 15, 2021, the company entered into an Agreement and Plan of Merger (the "GFN Merger Agreement") to acquire General Finance for $19 per share in cash, representing a total enterprise value of approximately $996 million, including the assumption of $400 million of net debt. General Finance — which operates as Pac-Van and Container King in the United States and Canada, and as Royal Wolf in Australia and New Zealand — is a leading provider of mobile storage as well as modular office space.
Superior ROE: United Rentals’ return on equity (ROE) is indicative of growth potential. The company’s ROE of 29.4% compares favorably with the industry average of 10.5%, implying that it is efficient in using shareholders’ funds.
Headwinds
Slowdown in the upstream business is a cause of concern for United Rentals. Demand for its services and products is sensitive to the level of exploration, development, and production activity of oil and natural gas companies. The level of exploration, development and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile and are likely to continue to be so. Notably, the company is experiencing a slowdown in upstream oil and gas operations.
Key Picks
Some better-ranked stocks in the same industry include GCP Applied Technologies Inc. , Advanced Drainage Systems, Inc. (ROAD - Free Report) and Owens Corning Inc. (OC - Free Report) , each carrying a Zacks Rank #2 (Buy).
GCP Applied Technologies, Advanced Drainage and Owens Corning’s earnings for 2021 are expected to increase 15.1%, 66% and 54.3%, respectively.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>