United Rentals Gains From Solid End-Market Demand & Buyouts

United Rentals, Inc.URI has been riding on its prudent investments in fleet and accretive acquisitions. Additionally, robust end-market demand (including Canada) along with its strong brand recognition appear conducive to its top and bottom-line growth. Being the largest equipment rental company in the world, United Rentals enjoys strong brand recognition, empowering it to draw more customers and build customer loyalty.

A Look at Third-Quarter 2018 Results

United Rentals, which shares space with PGT, Inc. PGTI , Armstrong World Industries, Inc. AWI and Gibraltar Industries, Inc. ROCK in the Zacks Building Products - Miscellaneous industry , recently reported third-quarter 2018 results, wherein earnings as well as revenues surpassed the Zacks Consensus Estimate, and also improved 45.8% and 19.8%, respectively, on a year-over-year basis. The upside can be attributed to strong gains in equipment rental volume (up 7.4%), rental rates (up 2.1%) and margins. Also, adjusted EBITDA margin improved 20 basis points (bps), given robust demand across construction and industrial verticals in the United States and Canada.

The company's strong business conditions are evident from its upbeat outlook for the rest of 2018. United Rentals increased its full-year total revenue/EBITDA/capex guidance, given robust performance across the company's end markets and geographies (including Canada). It revised its 2018 guidance by adding $120 million of total revenues and $50 million of adjusted EBITDA to the prior expectation, to account for the impact of the BlueLine acquisition.

The company now expects total revenues in the range of $7.89-$7.99 billion compared with the prior guidance of $7.77-$7.87 billion. Adjusted EBITDA is now anticipated in the range of $3.815-$3.865 billion, up from the prior guidance of $3.765-$3.815 billion.

Key Growth Drivers

United Rentals follows a robust expansion strategy via acquisitions and joint ventures. The most recent is the BlueLine acquisition in October 2018. BlueLine, one of the ten largest equipment rental companies in North America, has a strong well-diversified customer base, serving more than 50,000 customers in the construction and industrial sectors, with a focus on mid-sized and local accounts. This acquisition will boost the company's capacity across the largest metropolitan areas in North America, including both U.S. coasts, the Gulf South and Ontario. The buyout will also increase United Rentals' fleet by more than 46,000 rental assets across 114 branch locations.

Again in October, United Rentals of Canada, Inc., a unit of United Rentals, Inc., inked a deal to acquire the assets of WesternOne Rentals & Sales LP, an equipment rental provider of aerial lifts and heat solutions in Western Canada. The acquisition will boost the company's general rental and specialty offerings in key Canadian provinces. Meanwhile, in July 2018, United Rentals announced the acquisition of BakerCorp. International Holdings Inc. for $715 million. The deal will boost the company's specialty rental business in North America and enable it to foray into some European markets.

Apart from the company's inorganic drive, solid end-market demand also bodes well. United Rentals serves the following three principal end markets for equipment rental in North America, namely industrial and other non-construction, commercial construction and residential construction. The overall outlook of the construction market remained positive so far this year. Factors like an improving economy, Trump's impetus to boost infrastructure, wage growth, low unemployment levels and positive consumer sentiments raise optimism surrounding the sector's performance. As such, demand for United Rentals' products should increase as well, thereby driving revenues. The company expects that majority of its end markets will continue to experience solid demand for equipment rental services in 2018.

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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.

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

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