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What's in the Cards for United Rentals' (URI) Q1 Earnings?

Zacks Equity Research
·4-min read

United Rentals, Inc. URI is scheduled to report first-quarter 2020 results on Apr 29, after market close.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 5.3% and 2.7%, respectively. Notably, this largest equipment rental company reported earnings and revenue growth 15.5% and 6.5%, respectively, courtesy of improved demand in construction end-markets served, partly offset by slower industrial growth.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has declined 4.7% in the past 30 days to $3.05 per share. This indicates a 7.9% decline from the year-ago earnings of $3.31 per share. The consensus mark for revenues is $2.14 billion, suggesting a 1.1% year-over-year improvement.

United Rentals, Inc. Price and EPS Surprise

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

United Rentals, Inc. price-eps-surprise | United Rentals, Inc. Quote

Factors to Note

Softness in the oil & gas market is expected to have impacted United Rentals’ business in the first quarter. Slower industrial growth also added to the woes. The Zacks Consensus Estimate for equipment rentals gross profit is pegged at $639 million, indicating a 2.9% decline from the year-ago quarter.

Meanwhile, the outbreak of coronavirus resulted in shutdowns throughout the world in the latter part of the quarter (precisely March). General market uncertainties arising from the pandemic are expected to reflect on quarterly results to some extent.

From the margin perspective, higher rental operating costs in a slower growth environment — including costs related to repair and maintenance of fleet in upstream oil and gas markets — and increase in lower-margin used equipment sales are likely to have affected its margins.

On an encouraging note, United Rentals is likely to have benefited from improved demand in construction end-markets served and diversified product offerings in the quarter to be reported. Broad-based growth across geographic markets and vertical end markets served by the company (non-residential/infrastructure/residential) is expected to have supported revenue growth.

The Equipment Rentals business — accounting for more than 85% of its total revenues — is expected to have generated strong volume and rental rate growth.

The Zacks Consensus Estimate for Equipment Rentals revenues of $1,795 million indicates no change from the year-ago period but a 14.9% decline from fourth-quarter 2019. The same for rental equipment sales and new equipment sales suggests increase of 7.3% and 3.2% respectively, from the year-ago figures. Contractor supplies sales also indicate a marginal improvement from the prior year.

The company is also expected to have benefited from increased mix of Specialty (which includes fluid solutions, power & HVAC, trench safety and tool solutions) in the portfolio. The Specialty business carries higher return metrics with a less cyclical profile, partly due to a solutions-based selling approach. The business is expected to have supported earnings growth.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for United Rentals this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -23.81%. 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 #4 (Sell).

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.

GCP Applied Technologies Inc. GCP has an Earnings ESP of +38.46% and carries a Zacks Rank #3.

Masco Corporation MAS has an Earnings ESP of +10.73% and carries a Zacks Rank #3.

frontdoor, inc. FTDR has an Earnings ESP of +9.76% and holds a Zacks Rank #3.

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Masco Corporation (MAS) : Free Stock Analysis Report
 
United Rentals, Inc. (URI) : Free Stock Analysis Report
 
GCP Applied Technologies Inc. (GCP) : Free Stock Analysis Report
 
Frontdoor, Inc. (FTDR) : Free Stock Analysis Report
 
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Zacks Investment Research