Why Is United Rentals (URI) Up 1.9% Since Last Earnings Report?

A month has gone by since the last earnings report for United Rentals (URI). Shares have added about 1.9% in that time frame, underperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is United Rentals due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. United Rentals Q3 Earnings & Revenues Miss EstimatesUnited Rentals released tepid 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.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 HighlightsAdjusted 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 DiscussionGeneral 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.MarginsThe 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 SheetUnited 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 NarrowedTotal 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).How Have Estimates Been Moving Since Then?It turns out, estimates revision have trended downward during the past month.VGM ScoresCurrently, United Rentals has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, United Rentals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 United Rentals, Inc. (URI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks