United Rentals Reaches a New 52-Week High

Zacks

Shares of United Rentals, Inc. (URI) reached a new 52-week high of $99.95 on May 23, surpassing its previous high of $99.25 on May 13, driven by expected benefits from the implementation of growth strategies, higher rental rates, free cash flow generation and acquisitions.

The stock closed at $99.89 at the end of last Friday’s trading session, with a solid one-year return of about 78.2% and year-to-date return of around 28.2%, outperforming the S&P 500. The average volume of shares traded over the last three months was roughly 1772K.

This Greenwich, CT-based equipment rental and leasing services provider has a market cap of $9.7 billion and long-term expected earnings growth of 19.3%. The company has outperformed the Zacks Consensus Estimate in each of the four trailing quarters with an average surprise of 13.07%.  

Growth Drivers

On Apr 16, United Rentals reported adjusted earnings of 90 cents per share, a 55% improvement year-over-year and beating the Zacks Consensus Estimate of 70 cents per share. Total revenue also increased 7% year over year to $1.178 billion in the quarter mainly due to growth in both equipment rentals and sales of new equipment.

During the first quarter, the company repurchased $43 million worth of shares under its $500 million share repurchase program. United Rentals plans to complete the program by Apr 2015. Further share repurchases will provide support to the stock.

United Rentals maintained its revenue guidance in the range of $5.45 billion to $5.65 billion for fiscal 2014. Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) guidance for the full year is projected in the range of $2.55–$2.65 billion. The company expects an increase in rental rates of approximately 4% year over year and time utilization of around 68.5%.

United Rentals will benefit from the acquisition of National Pump. The deal marks United Rentals' venture into the pump rental sector, catapulting it to the position of the second largest provider of pump rentals in North America. The deal is expected to be accretive to United Rentals’ free cash flow and earnings per share in 2014.

In addition, United Rentals acquired the Power and HVAC (Heating, ventilation and air conditioning) assets of Blue-Stream Services, LLC on May 6. The acquisition will help in the expansion of United Rentals’ footprint in the Gulf region and offers significant cross-selling opportunities.

Notably, the company will continue to focus on reducing the cycle time for renting equipment, improving accuracy, service quality and efficiency and cost control, which will lead to an increase in gross margin. Additionally, the company is also poised to benefit from a rebound in non-residential construction.

United Rentals currently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Some other stocks worth considering in the sector include Gibraltar Industries, Inc. (ROCK), Simpson Manufacturing Co., Inc. (SSD) and The New Home Co. LLC (NWHM). While Gibraltar and Simpson Manufacturing have a Zacks Rank #1 (Strong Buy), New Home Company sports a Zacks Rank #2 (Buy).

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Read the Full Research Report on NWHM
Read the Full Research Report on ROCK
Read the Full Research Report on SSD


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