Personal Finance
URI

Why Shares of United Rentals, Inc. Popped 13% Today

Skid steer at construction site, where United Rentals is a key equipment provider.
Skid steer at construction site, where United Rentals is a key equipment provider.

Skid steer at construction site. Image source: Getty Images.

What happened

Shares of equipment-rental company United Rentals, Inc. (NYSE: URI) jumped as much as 13.2% on Thursday after the company reported earnings. At 1 p.m. EST shares were still up 12.3% on the day.

So what

Total revenue in the fourth quarter was flat at $1.52 billion, and net rental revenue rose only slightly, to $1.30 billion. Revenue topped expectations by a small amount, with analysts expecting $1.5 billion in total revenue in the quarter.

Earnings per share adjusted for one-time items were $2.67 in the quarter, up from $2.19 a year ago, and easily topping the $2.24 in earnings that analysts expected.

United Rentals also announced the acquisition of NES Rentals Holdings II, Inc. for $965 million in cash. The deal is expected to close next quarter and management will update expectations after closing.

Now what

Operations are essentially flat, with most of the earnings improvement coming from adjustments relating to debt securities. But flat revenue and a slight increase in gross profit in the quarter are more indicative of where the company is heading long-term.

United Rentals performed better than expected last quarter, but with shares trading at 20 times earnings and an already bloated $7.8 billion debt load about to increase with the NES acquisition, the company looks overvalued, in my opinion. Any slowdown in demand will be a huge negative, and investors seem to be overconfident in bottom-line improvement despite slow growth right now.

10 stocks we like better than United Rentals

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and United Rentals wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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.

In This Story

URI

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More