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In the last reported quarter, its earnings missed the Zacks Consensus Estimate by 3.1% but revenues beat the same by 3.6%. This largest equipment rental company’s second-quarter earnings and revenues grew 26.6% and 17.9% year over year, respectively.
Markedly, its earnings surpassed expectations in 29 of the last 32 quarters. The company topped revenue estimates in the trailing 17 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased 1.2% in the past 30 days to $6.80 per share. Nonetheless, the estimated figure indicates 25.9% growth from the year-ago earnings of $5.40 per share. The consensus mark for revenues is $2.6 billion, suggesting a 19% year-over-year improvement.
Factors to Note
Improved activity level backed by stronger demand in each of its end markets in North America (industrial and other non-construction, commercial construction, and residential construction) is expected to benefit United Rentals’ third-quarter results. Recovery across geographies and verticals — with solid activity in heavy manufacturing, corporate campuses, schools and transmission lines — is expected to have contributed to its top line.
The company’s investment in the General Rental segment (wherein the primary growth drivers are non-residential construction and plant maintenance) also bodes well. Both non-residential and maintenance areas have been gaining traction and verticals like chemical process, food and beverage, metals and mining as well as healthcare have been exhibiting solid growth.
Furthermore, acquisitions (like that of General Finance Corporation and Franklin Equipment buyouts) are expected to have helped United Rentals to boost the top line in the third quarter.
Overall, the company’s construction markets are expected to deliver better results than industrial markets, particularly oil and gas, which is anticipated to have remained soft during the quarter. Clearly, the oil and gas vertical is lagging but has started showing signs of recovery.
The Zacks Consensus Estimate for Equipment Rentals revenues (accounting for more than 85% of its total revenues) of $2,249 million indicates 20.8% growth from the year-ago period. The same for rental equipment revenues is $218 million, which suggests an increase of 9.5% from the year-ago reported figure.
The consensus estimate for new equipment sales suggests an increase of 11.1% year over year. The consensus mark for Contractor supplies sales indicates 6.9% growth from the prior year. The same for Service and other revenues suggests 12.5% growth on a year-over-year basis.
From the margin perspective, higher rental operating costs in a slower growth environment — including expenses related to repair and maintenance of fleet in upstream oil and gas markets — as well as an increase in lower-margin used equipment sales are likely to have affected its bottom line. Importantly, supply chain disruptions and higher inflation may have been a cause of concern.
Our proven model does not conclusively predict an earnings beat for United Rentals for the quarter to be reported. That is because 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. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: United Rentals has an Earnings ESP of -0.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +2.66% and carries a Zacks Rank #2.
Otis Worldwide Corporation (OTIS - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #3.
CatchMark Timber Trust, Inc. has an Earnings ESP of +8.11% and a Zacks Rank #3.
See More Zacks Research for These Tickers
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Factors Setting the Tone for United Rentals (URI) Q3 Earnings
United Rentals, Inc. (URI - Free Report) is scheduled to report third-quarter 2021 results on Oct 27, after market close.
In the last reported quarter, its earnings missed the Zacks Consensus Estimate by 3.1% but revenues beat the same by 3.6%. This largest equipment rental company’s second-quarter earnings and revenues grew 26.6% and 17.9% year over year, respectively.
Markedly, its earnings surpassed expectations in 29 of the last 32 quarters. The company topped revenue estimates in the trailing 17 quarters.
Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has decreased 1.2% in the past 30 days to $6.80 per share. Nonetheless, the estimated figure indicates 25.9% growth from the year-ago earnings of $5.40 per share. The consensus mark for revenues is $2.6 billion, suggesting a 19% year-over-year improvement.
Factors to Note
Improved activity level backed by stronger demand in each of its end markets in North America (industrial and other non-construction, commercial construction, and residential construction) is expected to benefit United Rentals’ third-quarter results. Recovery across geographies and verticals — with solid activity in heavy manufacturing, corporate campuses, schools and transmission lines — is expected to have contributed to its top line.
The company’s investment in the General Rental segment (wherein the primary growth drivers are non-residential construction and plant maintenance) also bodes well. Both non-residential and maintenance areas have been gaining traction and verticals like chemical process, food and beverage, metals and mining as well as healthcare have been exhibiting solid growth.
Furthermore, acquisitions (like that of General Finance Corporation and Franklin Equipment buyouts) are expected to have helped United Rentals to boost the top line in the third quarter.
Overall, the company’s construction markets are expected to deliver better results than industrial markets, particularly oil and gas, which is anticipated to have remained soft during the quarter. Clearly, the oil and gas vertical is lagging but has started showing signs of recovery.
The Zacks Consensus Estimate for Equipment Rentals revenues (accounting for more than 85% of its total revenues) of $2,249 million indicates 20.8% growth from the year-ago period. The same for rental equipment revenues is $218 million, which suggests an increase of 9.5% from the year-ago reported figure.
The consensus estimate for new equipment sales suggests an increase of 11.1% year over year. The consensus mark for Contractor supplies sales indicates 6.9% growth from the prior year. The same for Service and other revenues suggests 12.5% growth on a year-over-year basis.
From the margin perspective, higher rental operating costs in a slower growth environment — including expenses related to repair and maintenance of fleet in upstream oil and gas markets — as well as an increase in lower-margin used equipment sales are likely to have affected its bottom line. Importantly, supply chain disruptions and higher inflation may have been a cause of concern.
United Rentals, Inc. Price and EPS Surprise
United Rentals, Inc. price-eps-surprise | United Rentals, Inc. Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for United Rentals for the quarter to be reported. That is because 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. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: United Rentals has an Earnings ESP of -0.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combination
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.
KBR, Inc. (KBR - Free Report) has an Earnings ESP of +2.66% and carries a Zacks Rank #2.
Otis Worldwide Corporation (OTIS - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #3.
CatchMark Timber Trust, Inc. has an Earnings ESP of +8.11% and a Zacks Rank #3.