United Rentals (URI) Stock Up on Q1 Earnings & Revenue Beat

United Rentals, Inc. URI witnessed a 2.3% increase in its shares during the after-hours trading session on Apr 24, following the release of its impressive first-quarter 2024 results. The company surpassed the Zacks Consensus Estimate for both earnings and revenues, with notable year-over-year growth.

The company demonstrated significant revenue growth, particularly in its Equipment Rentals segment, which is its primary revenue source. This segment experienced a robust 6.9% growth, reflecting a high level of demand in the market. United Rentals' strategic acquisitions and extensive fleet have further strengthened its position as a market leader. Despite facing competition, the company's financial performance underscores its solid footing for future expansion and growth.

Moreover, this leading equipment rental company has increased its guidance for 2024, given the contribution from the Yak acquisition, the strength of the present market condition and the multi-year tailwinds the company sees across infrastructure, manufacturing and energy and power. In March 2024, United Rentals acquired Yak, showcasing its strategy to expand its specialty rental business, enhance its one-stop-shop offerings, and leverage opportunities for both secular growth and cross-selling.

United Rentals, Inc. Price, Consensus and EPS Surprise

United Rentals, Inc. Price, Consensus and EPS Surprise

United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote

Inside the Headlines

Adjusted earnings per share of $9.15 topped the Zacks Consensus Estimate of $8.35 by 9.6%. The reported figure increased 15.1% from the prior-year figure of $7.95 per share.

Total revenues of $3.5 billion beat the consensus mark of $3.4 billion by 2.1% and grew 6.1% year over year.

Rental revenues increased 6.9% from the year-ago quarter to a first-quarter record of $2.93 billion. This upside was mainly attributable to broad-based demand growth across end markets served by the company. Fleet productivity inched up 4% and average original equipment costs increased 3.6% year over year.

Used equipment sales dropped 1.3% from a year ago. The Used equipment sales produced an adjusted gross margin of 53.3%, which contracted 620 basis points (bps). The decrease in the year-over-year adjusted gross margin primarily resulted from the ongoing normalization of the used equipment market, which includes pricing adjustments.

Segment Discussion

General Rentals: This segment registered 2.6% year-over-year growth in rental revenues to $2.07 billion. Rental gross margin remained flat year over year at 32.9%.

Specialty: Segmental rental revenues increased 19% year over year to $859 million. Rental gross margin increased 200 bps year over year to reach 49.1%. This improvement was attributed to strong cost management and the absorption of fixed costs resulting from higher revenues.

The company’s total equipment rentals’ gross margin expanded 110 bps year over year to 37.7%.

Adjusted EBITDA for the reported period grew 5.6% year over year to $1.59 billion. However, the adjusted EBITDA margin contracted 30 bps to 45.5%. The decline in the adjusted EBITDA margin primarily stemmed from a decrease in the adjusted gross margin related to sales of used equipment.

Balance Sheet

United Rentals had cash and cash equivalents of $429 million as of Mar 31, 2024, up from $363 million at 2023-end. Total liquidity was $3.56 billion at the first-quarter end. Long-term debt at the first quarter of 2024-end was $11.32 billion, up from $10.1 billion at 2023-end.

On Mar 31, 2024, the net leverage ratio was 1.7x compared with 1.6x on Dec 31, 2023. Return on invested capital increased 50 bps year over year to 13.2% for the trailing 12 months ended on Mar 31, 2024.

During the first quarter of 2024, cash from operating activities improved 9.6% year over year to $1.03 billion. Free cash flow grew 81.8% year over year to $869 million for the said period.

2024 Guidance Raised

Total revenues are now expected to be in the range of $14.950-$15.450 billion compared with $14.65-$15.15 billion expected earlier. The new expectation reflects quite an improvement from $14.332 billion reported in 2023. Adjusted EBITDA is now projected to be between $7.04 billion and $7.29 billion versus $6.9 billion and $7.15 billion projected earlier. The guidance reflects an increase from $6.857 billion reported in 2023.

Net rental capital expenditure is projected to be in the range of $2-$2.3 billion (versus $1.9-$2.2 billion of earlier expectation) after gross purchases of $3.5-$3.8 billion versus $1.934 billion after gross purchases of $3.508 billion in 2023.

Net cash provided by operating activities is anticipated to be in the range of $4.3-$4.9 billion, depicting an increase from the prior expectation of $4.15-$4.75 billion.

Free cash flow (excluding the impact of merger and restructuring-related payments) is expected to be in the range of $2.05-$2.25 billion (versus $2.314 billion reported in 2023), an increase from the earlier guidance of $2-$2.2 billion.

Zacks Rank

Currently, URI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Few Recent Construction Releases

Masco Corporation MAS reported mixed results for first-quarter 2024, wherein earnings surpassed the Zacks Consensus Estimate but net sales lagged the same.

On a year-over-year basis, Masco’s earnings increased despite lower net sales. Strong operational efficiency helped it deliver solid earnings. Masco’s focus on a balanced capital deployment strategy helped it return $212 million to shareholders via dividends and share repurchases.

PulteGroup Inc. PHM reported stellar results in first-quarter 2024, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Also, both metrics increased year over year on favorable demand conditions and its balanced operating model, which allows the company to more effectively meet the individual needs of first-time, move-up and active-adult consumers.

The number of homes closed increased 11% to 7,095 units from the year-ago level. The average selling price of homes delivered was $538,000, down 1.3% year over year. New home orders gained 14% year over year to 8,379 units for the quarter, benefiting from higher gross orders and a lower cancelation rate. The value of new orders also rose 24% from a year ago to $4.7 billion.

D.R. Horton, Inc. DHI reported second-quarter fiscal 2024 (ended Mar 31, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate. On a year-over-year basis, both the top and bottom lines increased.

The upside was backed by the supply of new and existing homes as affordable price points remain limited and robust housing demand is supported by favorable demographics amid elevated inflation and mortgage/interest rates. Home closings rose 15% from the year-ago quarter to 22,548 homes. Net sales orders were up 14% year over year to 26,456 homes. The cancelation rate (on gross sales orders) was 15%, down from 18% a year ago.

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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.

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