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United Rentals (URI) Sharpens Competitive Edge: Here's How

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United Rentals, Inc. URI is benefiting from the U.S. administration’s increased focus on infrastructural improvement. This leading equipment rental company has been gaining from better fleet productivity on broad-based rental demand in construction and industrial verticals.

Shares of URI have dropped so far this year owing to the ongoing supply-chain challenges and higher inflation but outperformed the Zacks Building Products – Miscellaneous industry during the period.

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Zacks Investment Research


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The company has an impressive earnings and revenue surprise history. Its earnings surpassed expectations in 27 of the last 30 quarters. The company topped revenue estimates in 25 of the trailing 30 quarters. Meanwhile, earnings estimates have moved 5.8% north over the past 60 days, depicting analysts’ optimism over its prospects.

However, unprecedented supply-chain disruptions continue to be a headwind for United Rentals.

 Let’s take a look at the factors supporting the growth of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

U.S. Administration’s Infrastructural Push

United Rentals and other construction companies are expected to benefit from strong global trends in infrastructure modernization, energy transition, national security, and a potential super-cycle in global supply chain investments. Importantly, United Rentals is expected to continue maintaining positive momentum in the near term as the company’s solutions are closely aligned with President Biden’s policies and industry trends.

The need to rebuild the nation’s deteriorating roads and bridges and fund new climate-resilient and broadband initiatives is expected to aid URI. The company expects a diverse mix of federal projects for road and bridge work, water control, harbors and ports, and also on the power grid, which will drive growth in 2023 as well.

Solid Underlying Business

In 2021, equipment rentals represented 84.5% of the company’s total revenues. United Rentals has been witnessing widespread growth in rental revenues. During first-quarter 2022, rental revenues grew in double digits across all regions and verticals, despite winter, with a year-over-year increase of 30.5%. Rental revenues from non-residential construction verticals were up 28% year over year, and the same from infrastructure were up 17%. Industrial also grew 13%, with strong gains in refining, metals, minerals and power.

Further, used equipment continues to be strong, supported by better pricing and a higher percentage of fleet sold through its most profitable retail channel. The strength of the used equipment market is a key indicator of the rental industry’s performance.

Solid 2022 Guidance

Backed by solid first-quarter results and the recently completed acquisitions, the company lifted its 2022 guidance to reflect stronger growth in the core rental business and an improved used equipment business. The optimism was supported by positive customer sentiments and used equipment demand as well as persistent share growth opportunities for certain non-residential verticals, including power, healthcare, distribution, and technology. For 2022, United Rentals expects higher demand across the end markets served, with 11.3% year-over-year growth at the midpoint of the guided revenue range. This will be supported by a significant investment in growth capital.

Solid ROE & Higher Earnings Growth Rate

URI’s superior return on equity (ROE) is also indicative of its growth potential. The company’s ROE currently stands at 31.3%, which is higher than the industry’s 11.6%. This indicates efficiency in using shareholders’ funds and the ability to generate profit with minimum capital usage.

Earnings growth is also a key factor in stock valuation. The Zacks Consensus Estimate for 2022 earnings of $29.79 per share implies 35% year-over-year growth. The solid growth rate depicts the stock's promising future.

3 Better-Ranked Construction Stocks to Buy

Meritage Homes Corporation MTH, sporting a Zacks Rank #1, is one of the leading designers and builders of single-family homes.

Earnings are expected to grow 42.7% in 2022. Earnings estimates for 2022 have moved north to $27.52 per share from $24.49 over the past 30 days.

AECOM ACM — carrying a Zacks Rank #2 (Buy) — is a leading solutions provider for supporting professional, technical and management solutions for diverse industries across end markets like transportation, facilities, government and in environmental, energy and water businesses.

AECOM’s expected earnings growth rate for 2022 is 21.6%. The consensus mark for its 2022 earnings has moved up to $3.43 per share from $3.40 in the past 60 days.

Sterling Construction Co., Inc. STRL, a Zacks Rank #2 company, has been benefiting from broad-based growth across the e-Infrastructure, Building and Transportation solutions segments.

The consensus mark for Sterling’s 2022 earnings rose to $2.88 per share from $2.80 in the past 60 days. This suggests 34% year-over-year growth.


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