We are experiencing some temporary issues. The market data on this page is currently delayed. Please bear with us as we address this and restore your personalized lists.
United Rentals' Q3 Earnings & Revenues Miss Estimates, Stock Down
United Rentals, Inc. URI witnessed a 2.8% dip in its shares during the after-hours trading yesterday, following the release of its third-quarter 2024 results. The company’s earnings per share (EPS) and revenues fell short of the Zacks Consensus Estimate. Nonetheless, both metrics registered improvement on a year-over-year basis.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Matthew Flannery, CEO of United Rentals, expressed satisfaction with the company’s record third-quarter results, which aligned with expectations and showed growth in both construction and industrial markets.
The company has tightened the outlook ranges for revenue, adjusted EBITDA, rental capital expenditures, and net cash from operating activities while reaffirming the mid-points of its 2024 forecast.
United Rentals’ Quarterly Highlights
Adjusted EPS of $11.80 missed the Zacks Consensus Estimate of $12.49 by 5.5%. The reported figure, however, increased 0.6% from the prior-year adjusted figure of $11.73 per share.
Total revenues were $3.992 billion in the quarter, marginally missing the consensus mark of $3.994 billion. On a year-over-year basis, the top line grew 6% year over year.
Equipment Rentals revenues increased 7.4% from the year-ago quarter to $3.46 billion. Fleet productivity inched up 3.5% year over year, and the same increased 1.9%, excluding the impact of the Yak acquisition. Average original equipment at cost increased 3.8% year over year.
Used equipment sales (or sales of rental equipment) dropped 12.3% from a year ago to $321 million. The Used equipment sales produced an adjusted gross margin of 49.5%, which contracted 570 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.
URI’s Segment Discussion
General Rentals: This segment registered 0.9% year-over-year growth in rental revenues to a third-quarter record of $2.327 billion. Rental gross margin contracted 20 bps year over year at 37.6%.
Specialty: Segmental rental revenues improved 23.9% year over year to a third-quarter record of $1.136 billion. Excluding the impact of the Yak acquisition, rental revenues grew 14.8% year over year. Rental gross margin, however, contracted 210 bps year over year to 50%, reflecting higher increased depreciation expense.
Margins
The company’s total equipment rentals’ gross margin contracted 30 bps year over year to 41.6%.
Adjusted EBITDA for the reported period grew 2.9% year over year to $1.9 billion. However, the adjusted EBITDA margin contracted 140 bps to 47.7%. 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 $479 million as of Sept. 30, 2024, up from $363 million at 2023-end. Total liquidity was $2.87 billion at the third-quarter end. Long-term debt at the third quarter of 2024-end was $11.9 billion, up from $10.05 billion at 2023-end.
On Sept. 30, 2024, the net leverage ratio was 1.8x compared with 1.6x on Dec. 31, 2023. Return on invested capital was 13.2% for the trailing 12 months ended on Sept. 30, 2024.
During the first nine months of 2024, cash from operating activities improved 6.3% year over year to $3.5 billion. Free cash flow grew 4.7% year over year to $1.21 billion for the same period.
2024 Guidance Narrowed
Total revenues are now expected to be in the range of $15.1-$15.3 billion compared with 15.05-$15.35 billion expected earlier. The new expectation reflects an improvement from the $14.332 billion reported in 2023. Adjusted EBITDA is now projected to be between $7.115 billion and $7.215 billion compared with $7.09 billion and $7.24 billion projected earlier. The guidance reflects an increase from $6.857 billion reported in 2023.
Net rental capital expenditure is now projected to be in the range of $2.05-$2.25 billion (compared with $2-$2.3 billion expected earlier) after gross purchases of $3.55 billion compared with $1.934 billion after gross purchases of $3.508 billion in 2023.
Net cash provided by operating activities is now anticipated to be in the range of $4.4-$4.8 billion (compared with $4.3-$4.9 billion of earlier expectations).
Free cash flow (excluding the impact of merger and restructuring-related payments) is still expected to be in the range of $2.05-$2.25 billion (compared with $2.314 billion reported in 2023).
URI Stock’s Zacks Rank
Currently, URI carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Few Recent Construction Releases
NVR, Inc. NVR reported mixed third-quarter 2024 results, with earnings missing the Zacks Consensus Estimate and Homebuilding revenues surpassing the same. On the other hand, both metrics increased on a year-over-year basis.
This upside was backed by improved demand trends, which resulted in higher settlements. Although the cancelation rate increased in the quarter, growth in new orders is encouraging for the company.
PulteGroup Inc. PHM reported impressive results in the third quarter of 2024, wherein earnings and total revenues handily beat the Zacks Consensus Estimate and grew year over year.
PHM’s result reflects the successful execution of the company’s balanced spec and build-to-order operating model. This, alongside the structural shortage of homes from years of underbuilding, continued to favor the company. Thanks to such tailwinds, the home closings during the quarter grew year over year resulting in record third-quarter home sale revenues.
RPM International Inc. RPM reported impressive earnings in first-quarter fiscal 2025 (ended Aug. 31, 2024), which beat the Zacks Consensus Estimate by 4.6% and increased 12.2% year over year. Yet, net sales missed the consensus mark by 2.4% and declined 2.1% from the previous year.
RPM — a specialty chemicals manufacturer — reported strong earnings on the back of record adjusted EBIT for the 11th consecutive quarter and reduced interest expenses. The bottom line improved on the continued implementation of MAP 2025 operational improvement initiatives and leveraging its portfolio of products, services and entrepreneurial culture to capture growth opportunities. However, unfavorable foreign exchange and volume declines at Consumer Group and SPG units marred the top line.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
