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United Rentals (URI) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

United Rentals, Inc. URI is scheduled to report first-quarter 2019 results on Apr 17, after market close.

The company surpassed the Zacks Consensus Estimate by 1.7% in the last reported quarter. In fact, United Rentals has a strong earnings and revenue surprise history. The company’s earnings surpassed expectations in 11 of the past 12 quarters, while revenues topped estimates in 10 of the trailing 12 quarters.

The company’s fourth-quarter revenues rose 20% and earnings grew 45.2% year over year. The upside can be attributed to strong gains in volume, margins and rates. Solid integration of major acquisitions also aided its quarterly results. It further gained traction from investments in fleet and technology.

United Rentals, Inc. Price and EPS Surprise

United Rentals, Inc. Price and EPS Surprise | United Rentals, Inc. Quote

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the quarter to be reported is currently pegged at $3.10, remaining unchanged over the past 60 days. Nonetheless, this reflects an increase of 8% from the year-ago earnings of $2.87 per share. Revenues are expected to be $2.08 billion, up 19.8% year over year.

Let’s see how things are shaping up for this announcement.

Key Factors

Strong demand from non-residential construction activity, particularly in commercial and infrastructure sectors, and a rebound in industrial activity are expected to boost United Rentals’ revenues and earnings in the to-be-reported quarter.

Strong End-Market Demand: United Rentals has been benefiting from robust demand across construction and industrial verticals in the United States and Canada. The company has been witnessing sustained demand from infrastructure projects throughout multiple regions in both the United States and Canada. This is evident from its solid top-line growth (up 21.2% in 2018), given strong gains in volume and rates. In fact, rental revenues grew 21.4% from 2017, with 18.8% gain in the volume of equipment on rent and 2.2% increase in rental rates.

Factors such as strong organic growth, led by improving end-market demand and acquisitions, are likely to help the company record an improvement in rates. Equipment Rentals, accounting for nearly 86.3% of its total revenues, are expected to get a boost in the first quarter. The Zacks Consensus Estimate for Equipment Rentals revenues of $1.79 billion reflects a year-over-year rise of 22.4%.

Solid Inorganic Strategy to Aid Top-Line Growth: United Rentals follows a systematic inorganic strategy to expand its geographic borders and product portfolio.

The most recent buyout of the company is that of WesternOne Rentals & Sales LP, a leading regional equipment rental provider in Western Canada, in November 2018. The acquisition helped United Rentals to expand services to Alberta, British Columbia and Manitoba.

What the Zacks Model Unveils

Our proven model does not show that United Rentals is likely to beat earnings estimates in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as you can see below.

United Rentals currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%, making surprise prediction difficult. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revision momentum.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Potlatch Corporation PCH has an Earnings ESP of +45.46% and holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Installed Building Products, Inc. IBP has an Earnings ESP of +3.52% and carries a Zacks Rank #3.

Lennox International, Inc. LII has an Earnings ESP of +6.21% and a Zacks Rank #3.

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