United Rentals Acquires Cummins' Power Equipment Assets

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United Rentals, Inc. URI recently bought power equipment assets from Cummins Inc. CMI , thus expanding its Power & HVAC Fleet.

Acquisition Details

The acquired assets comprise mobile rental generator fleet ranging from 150 Kilowatts to 2 Megawatts. This addition will help United Rentals cash in on the strong demand for power solutions in North America.

Cummins designs and manufactures diesel and natural gas engines and related technologies. Post the acquisition, Cummins will continue to manufacture, service and support new power generation equipment for rental markets.

Inorganic Drive Bodes Well for United Rentals

Acquisitions have been an important part of United Rentals' growth strategy. The company expands its geographic borders and product portfolio through acquisitions and joint ventures.

Recently, United Rentals agreed to acquire Neff Corporation or Neff, one of the 10 large U.S. equipment rental companies. Neff's vast footmark and complementary fleet mix will add efficiencies of scale in key markets, predominantly in the fast-growing southern geographies.

Again, Neff's presence in the infrastructure sector fits well with United Rentals' Project XL vertical growth initiatives. Hence, this integration is likely to lead to significant revenue synergies through the cross-selling of United Rentals' broader fleet, including its specialty offerings (read more: United Rentals to Acquire Neff Corp for $1.3 Billion )

In April 2017, United Rentals completed the acquisition of NES Rentals Holdings II, Inc. ("NES"). Notably, NES is one of the ten large general equipment rental companies in the United States, providing specialized aerial equipment. The acquisition is expected to strengthen relationships with local and strategic accounts in the construction and industrial sectors, thus enhancing cross-selling capabilities.

NES contributed $105 million to revenues and $46 million in adjusted EBITDA in the second quarter of 2017. United Rentals has already realized $2.5 million in synergies and is on track to garner $40 million in cost savings from the NES transaction.

Stock Price Movement

Meanwhile, United Rentals' shares have gained 38.9% in the last one year, compared with the 3.3% increase of the industry to which it belongs. The company surpassed estimates in all of the past four quarters, with an average beat of 6.95%. Estimates have moved 1.9% north for the current year and 2.5% for the next over the last 30 days. Positive construction market outlook and the strategic acquisitions are expected to significantly drive growth, enhancing the stock's performance in the upcoming quarters as well.

Zacks Rank & Stocks to Consider

United Rentals carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the sector include KB Home KBH and NVR Inc. NVR , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Full-year 2017 earnings for KB Home are expected to increase 51.7%, while that of NVR are likely to rise 33.9%.

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United Rentals, Inc. (URI): Free Stock Analysis Report

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NVR, Inc. (NVR): Free Stock Analysis Report

Cummins Inc. (CMI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: URI , KBH , NVR , CMI

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