United Rentals Upped to Strong Buy - Analyst Blog

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On January 2, 2013, Zacks Investment Research upgraded United Rentals Inc. ( URI ) to Zacks #1 Rank (Strong Buy).

Reasons for Upgrade

Strong third-quarter 2012 results and rising estimates were the prime catalysts for United Rentals' rating upgrade. This rental & leasing services company has surpassed the Zacks Consensus Estimate for five straight quarters with an average surprise of 171%.

On October 16, 2012, the company reported adjusted earnings per share of $1.35 in the third quarter of 2012, which was roughly 21.6% higher than the Zacks Consensus Estimate of $1.11.

Revenue surged 71% year over year to $1,219 million. Rental revenue of $1,051 million was up 74% and contributed roughly 86% of revenues.

Further, United Rentals generated $45 million in cost savings during the quarter and expects to realize cost savings of at least $100 million by the end of fiscal 2012.

For the third quarter, the company reported an operating margin of 47%, which was up 700 basis points (bps) over the prior-year quarter. This was the highest operating margin reported by the company since its inception. The increase in margin was primarily driven by cost control measures.

Following a robust third quarter, United Rentals is positive and confident about its performance going forward. United Rentals now expects the rental rate for 2012 to be up 7% year over year compared to 6.5% mentioned earlier.

Earnings Estimates on the Rise

The Zacks Consensus Estimate for 2012 is $3.53 per share, which is up more than 9% from the last 60 days and reflects year-over-year growth of 89%. The Zacks Consensus Estimate for 2013 stands at $4.79 a share, inching up 0.2% from the last 60 days and suggesting improvement of 35.4% from the previous year.


One of the company's peers, Avis Budget Group Inc. ( CAR ), has a Zacks Rank of #3 (Hold) after it reported adjusted earnings of $1.46 per share for third-quarter 2012, missing the Zacks Consensus Estimate of $2.51. However, on a year-over-year basis, earnings surged 43% from $1.02 per share.4% growth in its third quarter 2012 earnings per share.

AVIS BUDGET GRP (CAR): Free Stock Analysis Report

UTD RENTALS INC (URI): 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.

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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