Company Reports

Following United Rentals’ first-quarter earnings update, we have raised our fair value estimate to $563 per share from $538. The change is largely attributable to our increased near-term margin expectations. We have become more optimistic about the company’s prospects over the past couple of quarters. Demand has moderated from high levels but remains positive.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers with better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found with competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and thousands of other rental companies across North America.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found with competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and thousands of other rental companies across North America.

On March 4, United Rentals announced that it is acquiring Yak Access, a specialty player, for $1.1 billion in cash. The company is planning to use a mix of new debt financing and existing access to credit facilities to fund the deal. Management expects the deal to be accretive to earnings and free cash flow immediately. The deal is expected to close in the current fiscal quarter. We don’t see any potential challenges arising that would prevent the company from closing the deal soon.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found with competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and thousands of other rental companies across North America.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found with competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and thousands of other rental companies across North America.

The key takeaway from United Rentals' fourth-quarter earnings was management’s confidence that sales growth will continue in 2024 despite coming off high levels in the last few years. Revenue growth in 2024 will have to contend with a tough 2023 comparison, when sales increased 23% year on year. That said, the equipment rental market continues to show signs of growth in the near term as more construction contractors choose to rent equipment instead of owning it. Putting these factors together, we think United Rentals’ top line will grow by 4% in 2024, near the midpoint of management's guidance.

United Rentals reported solid third-quarter results, thanks to continued strength in the equipment rental market. As a result, we raised our fair value estimate by over 3% to $452 (from $437 previously). We attribute roughly half of the fair value increase to stronger than expected near-term sales, with the balance from the time value of money since our last update.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found at other competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and thousands of other rental companies across North America.

United Rentals posted solid second-quarter results, including sales growth of 28% year over year and over 20 basis points of operating margin expansion. We raised our fair value estimate to $437 per share from $424 following the earnings release. The change is due to our stronger near-term sales and margin expectations following management’s raised guidance. The shares are now fairly valued, in our view. While the stock has experienced both upward and downward volatility year to date, the rental demand environment remains healthy. This is what gives us confidence to project over 21% sales growth in 2023, slightly above what United Rentals posted a year ago. We think strong demand will allow the company to maintain strong pricing and boost 2023 operating margin by 60 basis points to 28.4%.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found at other competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and thousands of other rental companies across North America.

United Rentals recently held its investor day, where management reiterated its 2023 outlook. This led us to leave our $424 fair value estimate unchanged. We'e expecting demand to remain strong for the company in the remainder of 2023. For sales, we're projecting 20% year-on-year growth, which is a strong level, given the company posted similar growth in 2022. In terms of margins, we believe strong demand will allow United Rentals to maintain strong pricing. As a result, we forecast operating margins to expand 60 basis points to 28.4% in 2023.

United Rentals reported solid first-quarter earnings, showing demand for rental equipment remains solid. Our fair value estimate increased to $424 (from $416 previously), largely due to the time value of money since our last update. The market did send United Rentals' shares down over 4% in intraday trading. We believe this is due to the company’s slight miss on earnings per share in the quarter. In our view, the stock continues to trade in slightly undervalued territory, roughly 14% below our fair value estimate.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found at other competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and at thousands of other rental companies across North America.

United Rentals continues to post strong performance, benefiting from strong rental demand. During 2022, the company grew sales by 20% year on year, bringing the total to $11.6 billion. The same factors that we’ve been talking about over the past few quarters were at play. Namely, the tight equipment supply market, which has pushed many construction contractors to rent equipment. While we’re starting to hear positive developments on the supply front from original equipment manufacturers, we believe it’ll take time for new equipment to make its way to contractors. That said, we expect 2023 to be another strong year for United Rentals, leading us to forecast 20% top-line growth. Some of the uplift in sales is related to the company’s recent acquisition of Ahern Rentals, the eighth-largest equipment rental company in North America. Putting these factors together, we elected to raise our fair value estimate to $416, up from $358 previously.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found at other competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and at thousands of other rental companies across North America.

On Nov. 14, United Rentals announced its acquisition of the eighth-largest equipment rental company in North America, Ahern Rentals. United is set to pay $2 billion in cash, with an acquisition multiple of 6.5 times EV/LTM adjusted EBITDA (as of September 2022). Management expects to realize $40 million in run-rate cost synergies roughly 12-18 months after the deal closes. Nearly 90% of the synergies will come from selling, general, and administrative cost reductions, with the balance coming from branch consolidation. On the revenue side, the firm is targeting $60 million in cross-sell synergies. Ahern has primarily been focused on general rental equipment, presenting United Rentals an opportunity to cross-sell its specialty equipment.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found at other competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and at thousands of other rental companies across North America.

The equipment rental market continues to remain resilient, despite weaker sentiment in global markets year-to-date. For United Rentals, the key driver over the past year-plus has been the shortage of new construction equipment. The heavy machinery industry has been constrained by the global chip shortage, which has slowed down production. Supply chains have improved each quarter, but there's still some challenges to work through. For rental companies, this has meant increased demand for rental equipment. As the number-one player in the rental industry, United Rentals has seen sales and margins increase considerably.

We think United Rentals will continue to be the top player in the equipment rental industry. As the industry leader, the company provides customers better equipment availability and reliability than smaller players. However, many of the equipment brands found in United Rentals’ product catalog can also be found at other competitors, such as Sunbelt Rentals (owned by Ashtead), Herc, and at thousands of other rental companies across North America.