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United Rentals (URI) Hits Fresh High: Is There Still Room to Run?

Zacks Equity Research

Shares of United Rentals (URI) have been strong performers lately, with the stock up 20.8% over the past month. The stock hit a new 52-week high of $174.11 in the previous session. United Rentals has gained 4.1% since the start of the year compared to the 6.8% move for the Zacks Construction sector and the 13.8% return for the Zacks Building Products - Miscellaneous industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 29, 2020, United Rentals reported EPS of $3.68 versus consensus estimate of $1.93.

For the current fiscal year, United Rentals is expected to post earnings of $15.26 per share on $8.35 billion in revenues. This represents a -21.82% change in EPS on a -10.68% change in revenues. For the next fiscal year, the company is expected to earn $16.28 per share on $8.69 billion in revenues. This represents a year-over-year change of 6.64% and 4.06%, respectively.

Valuation Metrics

United Rentals may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

United Rentals has a Value Score of A. The stock's Growth and Momentum Scores are C and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 11.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 3.6X versus its peer group's average of 9.6X. Additionally, the stock has a PEG ratio of 0.95. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, United Rentals currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if United Rentals meets the list of requirements. Thus, it seems as though United Rentals shares could have potential in the weeks and months to come.

How Does United Rentals Stack Up to the Competition?

Shares of United Rentals have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Gibraltar Industries (ROCK), Owens Corning (OC), and TopBuild (BLD), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for United Rentals, even beyond its own solid fundamental situation.


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United Rentals, Inc. (URI) : Free Stock Analysis Report
 
Owens Corning Inc (OC) : Free Stock Analysis Report
 
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Zacks Investment Research