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United Rentals (URI) Q4 Earnings & Revenues Beat Estimates

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Zacks Equity Research
·4 min read
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United Rentals, Inc.’s URI reported fourth-quarter 2020 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. In fact, both the top and bottom lines surpassed the consensus estimate for the 12 straight quarters. However, both the metrics declined year over year. The company provided 2021 guidance, wherein it expects revenues to improve year over year.

Inside the Headlines

Adjusted earnings of $5.04 per share outpaced the consensus estimate of $4.28 by 17.8%. However, the reported figure decreased 10% from the prior-year quarter. Total revenues of $2.28 billion surpassed the consensus mark of $2.17 billion by 4.9% but declined 7.2% year over year.

Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) fell 10.1% from the year-ago quarter, primarily due to the pandemic.

Quarterly fleet productivity was down 3.9% year over year on account of lower rental volumes. That said, fleet productivity improved 420 basis points (bps) sequentially, reflecting better fleet absorption.

Used equipment sales generated $275 million of proceeds compared with $244 million a year ago. Adjusted gross margin of 42.5% contracted 90 bps.

United Rentals, Inc. Price, Consensus and EPS Surprise

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

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

Segment Discussion

General Rentals: Segment equipment rentals’ revenues fell 11.1% year over year to $1.43 billion. Rental gross margin contracted 190 bps year over year to 38% due to increased depreciation expenses and rise in insurance costs.

Trench, Power and Pump or Specialty Rentals: Segmental rental revenues decreased 6.6% year over year to $422 million. Rental gross margin, however, expanded 70 bps on a year-over-year basis to 44.5% owing to lower operating costs, partly offset by increased depreciation expenses.

Margins

The company’s total equipment rentals gross margin declined 120 bps year over year. Adjusted EBITDA also fell 10.1% from the prior-year quarter to $1.037 billion. Nonetheless, adjusted EBITDA margin contracted 150 bps to 45.5% due to decrease of 80 basis points in rental margin.

Balance Sheet

United Rentals had cash and cash equivalents of $202 million as of Dec 31, 2020 compared with $52 million at 2019-end. Total liquidity was $3.073 billion at quarter-end. The company’s free cash flow was $434 million for the fourth quarter, lower than $484 million a year ago.

Net leverage ratio was 2.4 as of Dec 31, 2020 compared with 2.6 at 2019-end. Notably, it has reduced total net debt by $1.453 billion year to date.
2020 Results

In 2020, the company reported revenues of $8.5 billion, down 8.8% year over year. Adjusted earnings per share for 2020 came in at $17.44, down 10.7% year over year.

2021 Guidance

Total revenues are expected in the range of $8.625 billion to $9.025 billion, indicating a increase from $8.530 billion in 2020.

Adjusted EBITDA is projected between $3.925 billion and $4.125 billion, compared with the prior-year figure of $3.932 billion.

Net rental capital expenditures after gross purchases are projected to be $2-$2.3 billion, reflecting an increase from $961 million in 2020.

Net cash provided by operating activities is anticipated in the range of $2.95-$3.45 billion, highlighting a decline from $2.658 billion in 2020.

Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $1.65-$1.85 billion, which suggests an increase from $2.454 billion reported in 2020.

Zacks Rank & Other Key Picks

United Rentals currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks, which warrant a look in the same space include Gibraltar Industries, Inc. ROCK, Owens Corning OC and PGT Innovations, Inc. PGTI. All these stocks have the same rank as United Rentals.

Gibraltar Industries earnings for 2021 are likely to witness growth of 26.1%.

Owens Corning have an impressive long-term earnings growth rate of 11%.

PGT Innovations earnings for 2021 are likely to witness growth of 21.3%.

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