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United Rentals Up on Q4 Earnings Beat - Analyst Blog

Posted
1/24/2014 9:50:00 AM
By: Zacks.com
Referenced Stocks:CATM;PFSW;RENT;URI

The share price of United Rentals, Inc. ( URI ) went up 2.1% as the company reported a 25% year-over-year increase in its fourth-quarter 2013 adjusted earnings of $1.59 per share. The reported figure also outperformed the Zacks Consensus Estimate of $1.45.

GAAP earnings (including RSC merger related costs as well as restructuring and asset impairment charges) came in at $1.31 per share, compared with the prior-year quarter earnings of 40 cents per share.

Operational Update

Total revenue improved 7% year over year to $1.338 billion in the quarter. The year-over-year rise was mainly due to growth in both equipment rentals (9.4%) and sales of new equipment (3%), partly offset by decline in sale of rental equipment (5%). Revenues beat the Zacks Consensus Estimate of $1.331 billion.

Cost of sales increased 2% to $771 million from $754 million in the year-ago quarter. Gross profit improved 15% year over year to $567 million. Consequently, gross margin expanded 160 basis points (bps) to 43% in the quarter.

Selling, general and administrative expenses went down 7% year over year to $163 million. Adjusted operating profit rose 27% to $404 million in the quarter. Operating margin increased 470 bps to 30.2% in the quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the reported quarter improved 18% to $651 million from $553 million in the year-ago quarter. Adjusted EBITDA margin was 48.7% in the quarter, rising 440 bps from the year-ago quarter. 

Time utilization increased 60 bps year over year to 69.3% in the quarter. The size of the rental fleet was $7.73 billion as of fiscal 2013 end, compared with $7.23 billion at 2012-end.

Segmental Performance

Revenues in the General Rentals segment increased 8.7% over year to $1,045 million in the reported quarter. Gross profit for the segment increased 15.1% to $451 million from $392 million in the year-ago quarter.

The Trench Safety, Power & HVAC segment's revenues climbed 17% to $88 million in the quarter from $75 million in the year-ago quarter. Gross profit for the segment improved 11% to $39 million from $35 million in the prior-year quarter.

Fiscal 2013 Performance

For fiscal 2013, United Rentals reported adjusted earnings per share of $4.91, up 31% from $3.76 in fiscal 2012. Including one-time items, earnings per share was $3.64 compared with 79 cents earned in the prior fiscal. Revenues increased 20% year over year to $4.9 billion. Time utilization increased 70 bps to a company record 68.2% in fiscal 2013.

Financial Update

Cash and cash equivalents were $175 million as of Dec 31, 2013, compared with $106 million as of Dec 31, 2012. Long-term debt was $6.57 billion as of Dec 31, 2013 versus $6.68 billion as of Dec 31, 2012. Cash provided by operating activities was $1551 million in fiscal 2013, as against $721 million in the prior year. For the full year 2013, free cash flow was $383 million, compared with usage of $223 million in the prior year 

In Oct 2013, United Rentals' board of directors approved a $500-million share repurchase program. During the fourth quarter, the company repurchased common stock worth $9 million and expects to complete the program within 18 months.

Outlook

United Rentals expects revenues in the range of $5.25 billion to $5.45 billion in fiscal 2014. Adjusted EBITDA guidance for the full year is projected in the range of $2.45 billion-$2.55 billion. The company expects an increase in rental rates of approximately 4.0% year over year and ime utilization of around 68.5%.

Net rental capital expenditures is planned at approximately $1.15 billion, after gross purchases of approximately $1.65 billion; and the company expects free cash flow in the range of $400 million to $450 million. Fiscal 2013 was a record year for United Rentals on all grounds: revenues, EBITDA, EBITDA margin and EPS.

Greenwich, Conn.-based United Rentals is the largest equipment rental company in the world, with an integrated network of 832 rentals. The company offers leases on about 3,100 classes of equipment with total original cost of $7.73 billion.

United Rentals currently carries a Zacks Rank #2 (Buy).  Some other stocks worth considering in the sector include Cardtronics Inc. ( CATM ), Rentrak Corp. ( RENT ) and PFSweb Inc. ( PFSW ). While Cardtronics and Rentrak sport a Zacks Rank #1 (Strong Buy), PFSweb has a Zacks Rank #2 (Buy).



CARDTRONICS INC (CATM): Free Stock Analysis Report

PFSWEB INC (PFSW): Free Stock Analysis Report

RENTRAK CORP (RENT): Free Stock Analysis Report

UTD RENTALS INC (URI): Free Stock Analysis Report

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