United Rentals (URI) Beats On Q3 Earnings, Narrows View
Zacks Investment Research | Oct 16, 2019 11:30PM ET
United Rentals, Inc. (NYSE:URI) reported third-quarter 2019 results, wherein earnings and revenues beat the respective Zacks Consensus Estimate. However, the company narrowed its full-year guidance. United Rentals remains concerned about the lingering economic uncertainty that could impact construction and industrial activity. United Rentals stock was down about 4% immediately after the earnings announcement in the extended hours of trading on Oct 16.
Nonetheless, the company has been witnessing improved demand in construction end-markets served, partly offset by slower industrial growth. It remains upbeat about 2020 and expects higher free cash flow generation, considering all these market dynamics.
Inside the Headlines
Adjusted earnings of $5.96 per share beat the Zacks Consensus Estimate of $5.53 by 7.8% and increased 25.7% from the prior-year figure of $4.74.
Revenues
Total revenues of $2.49 billion surpassed the consensus mark of $2.45 billion by 1.6%. Moreover, revenues rose 17.6% year over year.
Rental revenues (including revenues from owned equipment rental, re-rent and ancillary) were also up 15.4% (increasing 4.2% on a pro-forma basis) from the year-ago quarter to a record $2.15 billion, buoyed by solid impact of BakerCorp and BlueLine acquisitions. The pro-forma improvement reflects growth in construction end markets served by the company.
Fleet productivity was down 1.3% year over year in the quarter, mainly due to the impact of the above-mentioned buyouts. On a pro-forma basis, fleet productivity was up 1.7% from the prior-year quarter, attributable to improvement in rental rates and fleet mix, partially offset by a decline in time utilization owing to integration of the recent acquisitions. Notably, Fleet productivity aggregates the impact of changes in rates, utilization and mix on owned equipment rental revenues.
Segment Discussion
General Rentals: Segment equipment rentals’ revenues increased 13.7% year over year to $1.64 billion. However, rental gross margin contracted 270 basis points (bps) year over year to 40.9% due to higher operating costs and the impact of acquisitions.
Trench, Power and Pump/Specialty: Segmental rentals revenues increased 21.1% year over year to $505 million. Organically, sales grew 10.3% from the prior-year quarter. Rentals gross margin declined 360 bps on a year-over-year basis to 48.7% owing to acquisitions, and higher operating costs due to repair and maintenance works.
Overall Margins
The company’s total equipment rentals gross margin dropped 280 bps year over year to 42.7%.
Nevertheless, adjusted EBITDA increased 14% from the prior-year quarter to $1.21 billion. However, adjusted EBITDA margin contracted 150 bps to 48.5% in the quarter, owing to the impact of the completed acquisitions. On a pro-forma basis, EBITDA margin declined 40 bps, reflecting higher operating costs.
United Rentals, Inc. Price, Consensus and EPS Surprise
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