We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why Is United Rentals (URI) Up 3.5% Since Last Earnings Report?
Read MoreHide Full Article
It has been about a month since the last earnings report for United Rentals (URI - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Rentals due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
United Rentals, Inc.’s fourth-quarter 2022 earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.
URI provided solid full-year 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention to buyback $1 billion of common stock in 2023.
Looking forward, Matthew Flannery, CEO of United Rentals, said, “Our guidance reflects our expectations for another year of strong growth, and our ability to convert this growth into compelling returns. The introduction of our dividend program reflects the strength and resiliency of our operating model and our ability to generate cash across the cycle, while continuing to invest in growth. Combined with the restart of our share repurchase program, we expect to return approximately $1.4 billion of cash to our shareholders this year as we continue to drive long-term value creation.”
Inside the Headlines
Adjusted earnings of $9.74 per share missed the Zacks Consensus Estimate of $10.12 by 3.8%. The reported figure increased by 31.8% from the prior-year figure of $7.39 per share.
Total revenues of $3.296 billion slightly lagged the consensus mark of $3.3 billion but grew 18.7% year over year.
Rental revenues increased 18.8% from the year-ago quarter to $2.75 billion. This upside was mainly attributable to broad-based demand growth across end markets served by the company. Fleet productivity was up 5.9% and average original equipment costs (“OEC”) increased by 14.2% year over year.
Used equipment sales rose 26.2% from a year ago. The Used equipment sales produced an adjusted gross margin of 61.6%, which expanded 940 basis points (bps) due to strong pricing and improved channel mix.
Segment Discussion
General Rentals: This segment registered 19.1% year-over-year growth in rental revenues to $2.023 billion. Rental gross margin expanded 140 bps year over year to 41.6%, courtesy of improved fixed cost absorption due to higher revenues.
Specialty: Segmental rental revenues increased 18.1% year over year to $724 million. Rentals’ gross margin expanded 410 bps on a year-over-year basis to 49.3%. This was backed by better cost performance and fixed cost absorption on higher revenues.
Margins
The company’s total equipment rentals’ gross margin rose 210 bps year over year to 43.6%. Adjusted EBITDA for the reported period grew 25.8% year over year to $1.647 billion. Adjusted EBITDA margin also increased 280 bps to 50%.
2022 Highlights
For the full year, the company generated total revenues of $11.642 billion, up 19.8% year over year and adjusted earnings of $32.50 per share, up 47.3% from a year ago period. Adjusted EBITDA rose 27.3% and adjusted EBITDA margin expanded 290 bps to 48.3% year over year.
Balance Sheet
United Rentals had cash and cash equivalents of $106 million as of Dec 31, 2022, down from $144 million at 2021-end. Total liquidity was $2.896 billion at December 2022-end. Long-term debt at 2022-end was $11.21 billion, up from $8.78 billion at 2021-end.
At Dec 31, 2022, net leverage ratio was 2x as compared to 2.2x at Dec 31, 2021. Return on invested capital (ROIC) increased 240 bps year-over-year and 50 bps sequentially to a record 12.7% for 2022.
Cash from operating activities increased to $1,251 million in the fourth quarter and $4,433 million in 2022 from $668 million and $3,689 million in the respective year-ago period. Free cash flow, including merger and restructuring-related payments, grew 16.5% year over year to $1.764 billion for 2022.
2023 Guidance
Total revenues are expected in the range of $13.7-$14.2 billion, indicating an increase from $11.642 billion reported in 2022. Adjusted EBITDA is projected between $6.6 billion and $6.85 billion.
Net rental capital expenditure after gross purchases is projected within $2-$2.25 billion, indicating an increase from $2.471 billion in 2022.
Net cash provided by operating activities is anticipated in the range of $4.4-$4.8 billion, suggesting a rise from $4.433 billion in 2022.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $2.1-$2.35 billion compared with $1.768 billion reported in 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 12.88% due to these changes.
VGM Scores
At this time, United Rentals has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise United Rentals has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why Is United Rentals (URI) Up 3.5% Since Last Earnings Report?
It has been about a month since the last earnings report for United Rentals (URI - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is United Rentals due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
United Rentals (URI - Free Report) Q4 Earnings Lag, 2023 View Solid
United Rentals, Inc.’s fourth-quarter 2022 earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.
URI provided solid full-year 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention to buyback $1 billion of common stock in 2023.
Looking forward, Matthew Flannery, CEO of United Rentals, said, “Our guidance reflects our expectations for another year of strong growth, and our ability to convert this growth into compelling returns. The introduction of our dividend program reflects the strength and resiliency of our operating model and our ability to generate cash across the cycle, while continuing to invest in growth. Combined with the restart of our share repurchase program, we expect to return approximately $1.4 billion of cash to our shareholders this year as we continue to drive long-term value creation.”
Inside the Headlines
Adjusted earnings of $9.74 per share missed the Zacks Consensus Estimate of $10.12 by 3.8%. The reported figure increased by 31.8% from the prior-year figure of $7.39 per share.
Total revenues of $3.296 billion slightly lagged the consensus mark of $3.3 billion but grew 18.7% year over year.
Rental revenues increased 18.8% from the year-ago quarter to $2.75 billion. This upside was mainly attributable to broad-based demand growth across end markets served by the company. Fleet productivity was up 5.9% and average original equipment costs (“OEC”) increased by 14.2% year over year.
Used equipment sales rose 26.2% from a year ago. The Used equipment sales produced an adjusted gross margin of 61.6%, which expanded 940 basis points (bps) due to strong pricing and improved channel mix.
Segment Discussion
General Rentals: This segment registered 19.1% year-over-year growth in rental revenues to $2.023 billion. Rental gross margin expanded 140 bps year over year to 41.6%, courtesy of improved fixed cost absorption due to higher revenues.
Specialty: Segmental rental revenues increased 18.1% year over year to $724 million. Rentals’ gross margin expanded 410 bps on a year-over-year basis to 49.3%. This was backed by better cost performance and fixed cost absorption on higher revenues.
Margins
The company’s total equipment rentals’ gross margin rose 210 bps year over year to 43.6%. Adjusted EBITDA for the reported period grew 25.8% year over year to $1.647 billion. Adjusted EBITDA margin also increased 280 bps to 50%.
2022 Highlights
For the full year, the company generated total revenues of $11.642 billion, up 19.8% year over year and adjusted earnings of $32.50 per share, up 47.3% from a year ago period. Adjusted EBITDA rose 27.3% and adjusted EBITDA margin expanded 290 bps to 48.3% year over year.
Balance Sheet
United Rentals had cash and cash equivalents of $106 million as of Dec 31, 2022, down from $144 million at 2021-end. Total liquidity was $2.896 billion at December 2022-end. Long-term debt at 2022-end was $11.21 billion, up from $8.78 billion at 2021-end.
At Dec 31, 2022, net leverage ratio was 2x as compared to 2.2x at Dec 31, 2021. Return on invested capital (ROIC) increased 240 bps year-over-year and 50 bps sequentially to a record 12.7% for 2022.
Cash from operating activities increased to $1,251 million in the fourth quarter and $4,433 million in 2022 from $668 million and $3,689 million in the respective year-ago period. Free cash flow, including merger and restructuring-related payments, grew 16.5% year over year to $1.764 billion for 2022.
2023 Guidance
Total revenues are expected in the range of $13.7-$14.2 billion, indicating an increase from $11.642 billion reported in 2022. Adjusted EBITDA is projected between $6.6 billion and $6.85 billion.
Net rental capital expenditure after gross purchases is projected within $2-$2.25 billion, indicating an increase from $2.471 billion in 2022.
Net cash provided by operating activities is anticipated in the range of $4.4-$4.8 billion, suggesting a rise from $4.433 billion in 2022.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $2.1-$2.35 billion compared with $1.768 billion reported in 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 12.88% due to these changes.
VGM Scores
At this time, United Rentals has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise United Rentals has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.