United Rentals, Inc. (URI) reported second-quarter 2013 earnings of $1.12 per share, beating the Zacks Consensus Estimate of $1.01 and exceeding the prior-year quarter’s earnings of 66 cents per share.
On a reported basis, earnings were 78 cents per share compared with the prior-year quarter’s loss of 63 cents per share. Earnings in the reported quarter include RSC merger related costs along with restructuring and asset impairment charges.
Total revenue improved 22% year over year to $1.206 billion in the quarter. The year-over-year rise is mainly due to growth in the sales of rental equipment and an increase in equipment rentals. The results missed the Zacks Consensus Estimate of $1.228 billion.
Cost of sales increased to $735 million in the second quarter from $619 million in the year-ago quarter. Gross profit improved 26% year over year to $471 million. Consequently, gross margin expanded 240 basis points (bps) to 47% in the quarter.
Selling, general and administrative expenses went up 4% year over year to $152 million. Reported operating profit raised an impressive five-fold to $250 million. Adjusted operating profit went up 40% to $319 million in the quarter. Operating margin increased 350 bps to 26.5% in the quarter.
Adjusted EBITDA in the reported quarter improved 31% to $549 million from $418 million in the year-ago quarter. Time utilization increased 60 bps year over year to a record 67.9%. The size of the rental fleet was $7.7 billion as of Jun 30, 2013, compared with $7.23 billion as of Dec 31, 2012. The company also realized cost synergies of $60 million in the quarter from the RSC integration.
Revenues in the General Rentals segment increased 19% over year to $932 million in the reported quarter. Gross profit for the segment also increased 25% to $366 million in the second quarter from $293 million in the year-ago quarter.
Trench Safety, Power & HVAC segment’s revenues climbed 20% to $77 million in the quarter from $64 million in the year-ago quarter. Gross profit for the segment improved 20% to $36 million in the second quarter from $30 million in the year-ago quarter.
Cash and cash equivalents were $133 million as of Jun 30, 2013, compared with $106 million as of Dec 31, 2012. Long-term debt stood at $6.73 billion as of Jun 30, 2013, compared with $6.67 billion as of Dec 31, 2012.
Cash provided by operating activities was $469 million as of Jun 30, 2013, compared with $88 million a year ago. For the second quarter 2013, total rental and non-rental capital expenditures were $763 million, compared with $472 million in the prior-year quarter.
United Rentals reiterated its adjusted EBITDA guidance for full year in the range of $2.25 billion - $2.35 billion. The company has reaffirmed its outlook for time utilization of around 68.0%. It has also retained the outlook of cost synergies on a run-rate basis in the band of $230 million-$250 million for fiscal 2013.
Greenwich, CT-based United Rentals is the largest equipment rental company in the world, with an integrated network of 830 rentals. The company offers for rent about 3,300 classes of equipment with a total original cost of $7.23 billion.
United Rentals currently retains a Zacks Rank #4 (Sell). Other companies in the building and construction industry with favorable Zacks Ranks are National Research Corp. (NRCIB), Aegion Corporation (AEGN) and USG Corporation (USG). While National Research holds a Zacks Rank #1 (Strong Buy), Aegion Corporation and USG Corporation carry a Zacks Rank #2 (Buy).
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