United Rentals shares up 9 percent on 4Q profits

United Rentals shares up 9 percent after 4Q net income widely beats expectations

Associated Press

NEW YORK (AP) -- Shares of heavy equipment rental company United Rentals Inc. surged 9 percent Thursday after the company announced fourth-quarter earnings that widely beat analyst expectations.

THE SPARK: United Rentals reported its earnings late Wednesday, and its shares jumped when trading opened Thursday morning.

Analysts were surprised by the company's net income of $29 million, which was a big turnaround from the company's loss of $21 million during the same quarter a year before.

The company said it earned adjusted net income of 82 cents per share, a figure that excluded one-time charges like restructuring costs. That was well above the adjusted net income of 58 cents per share that analysts expected, according to FactSet.

Revenue during the quarter was $746 million, up 25 percent from the prior year period and handily beating analyst expectations for $688 million.

THE BIG PICTURE: United Rentals rents the kind of heavy equipment used by construction companies, like backhoes, skid-steer loaders, forklifts, and earthmoving equipment. That makes the company's sales vulnerable to a downturn in construction activity, because companies cut back their work and don't need to rent as much equipment.

Shares of United Rentals plunged during the housing crash, falling from above $34 a share in late 2007 to just more than $3 a share in March 2009. They have recouped that entire drop, even though they tripped last summer and fell back below $20 for several weeks.

The company said Wednesday that it is benefitting from two broad trends: An increase in rental rather than ownership of heavy equipment, and an early recovery in the construction industry.

THE ANALYSIS: KeyBanc Capital Markets Inc. analyst Joe Box said he expects shares of United Rentals to keep rising. He reiterated his "buy" rating on the stock and set a price target of $40.

SHARE ACTION: United Rentals stock rose $3.34, or 9.6 percent, to $38.11 by early afternoon.

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