United Rentals' (URI) Q1 Earnings & Revenues Top, Stock Up

United Rentals’ URI shares gained 6.7% in the after-hour trading session on Apr 17, following the company’s first-quarter 2019 earnings release, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate and improved on a year-over-year basis. The upside can be attributed to broad-based growth across geographic markets and vertical end markets served by the company. Solid integration of major acquisitions also boosted the quarterly results. It further gained traction from investments in fleet and technology.

Adjusted earnings of $3.31 per share beat the consensus mark of $3.06 by 8.3% and increased 15.3% from the prior-year figure of $2.87.

Revenues

Total revenues of $2.12 billion surpassed the consensus mark of $2.07 billion by 2.5%. Moreover, revenues rose 22.1% year over year.

Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) were also up 23% (7.2% on a pro-forma basis) from the year-ago quarter to $1.8 billion, buoyed by broad-based growth across geographic markets and vertical end markets served by the company.

Fleet productivity was down 1.3% year over year in the quarter, mainly due to the impact of BakerCorp and BlueLine buyouts. On a pro-forma basis, fleet productivity was up 2.2%, attributable to improvement in rental rates and fleet mix, partially offset by a decline in time utilization owing to the integration of recent acquisitions and adverse weather.

Notably, Fleet productivity aggregates the impact of changes in rates, utilization and mix on owned equipment rental revenues.

United Rentals, Inc. Price, Consensus and EPS Surprise

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

Segment Discussion

General Rentals: Segment equipment rentals’ revenues increased 18.5% year over year to $1.4 billion. Segment equipment rentals’ gross profit rose 17.6% from a year ago to $501 million. However, gross margin contracted 30 basis points (bps) year over year.

Trench, Power and Pump: Segmental equipment rentals revenues increased 44.2% year over year to $372 million. Equipment rentals gross profit rose 31.9% to $157 million, while gross margin declined 390 bps on a year-over-year basis. The downside was mainly due to the impact of the said acquisitions. An increase in lower-margin re-rent revenues added to the woes.

Overall Margins

The company’s total equipment rentals gross margin dropped 70 bps year over year to 36.7%.

Nevertheless, adjusted EBITDA increased 18.1% from the prior-year quarter to a record of $921 million. However, adjusted EBITDA margin contracted 150 bps to 43.5% in the quarter, owing to the impact of the completed acquisitions. On a pro-forma basis, EBITDA margin advanced 30 bps.

Balance Sheet

United Rentals’ cash and cash equivalents totaled $52 million as of Mar 31 compared with $43 million in the corresponding period of 2018.

In the quarter, the company generated $667 million as net cash from operating activities, reflecting an increase of 3.9% from the year-ago period.

Free cash flow was $575 million in the quarter (up 11.4% year over year).

Share Repurchase Program

In the quarter, United Rentals repurchased $210 million worth of stocks and reduced its share count by 6.1% year over year. As of Mar 31, 2019, the company repurchased $630 million of common stock under its $1.25 billion program.

2019 Guidance Reaffirmed

Total revenues are expected in the range of $9.15-$9.55 billion, reflecting an increase from $8.05 billion in 2018.

Adjusted EBITDA is projected between $4.35 billion and $4.55 billion compared with $3.86 billion in 2018.

Net rental capital expenditures after gross purchases are projected in the range of $1.4-$1.55 billion compared with $1.442 billion in 2018.

Net cash provided by operating activities is maintained in the range of $2.85-$3.2 billion versus 2.85 billion reported in 2018.

Free cash flow is expected in the range of $1.3-$1.5 billion compared with $1.33 billion in 2018.

Zacks Rank & Key Picks

United Rentals currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Construction sector are Armstrong World Industries, Inc. AWI, Patrick Industries, Inc. PATK and Construction Partners, Inc. ROAD, each carrying a Zacks Rank #2 (Buy).

Armstrong World’s 2019 earnings are expected to increase 21.9%.

Patrick Industries and Construction Partners’ three-five year expected EPS growth rate is projected at 11.2% and 10%, respectively.

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