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United Rentals Inc URI

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Morningstar’s Analysis

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URI Posts Better-Than-Expected Q2 as it Cut Expenses; Maintaining FVE

Scott Pope, CFA Equity Analyst

Analyst Note

| Scott Pope, CFA |

As coronavirus disruptions impacted several of United Rentals’ end markets, revenue plunged 15.3% year over year. United Rentals has significant exposure to cratering energy markets, which historically represented 15% of revenue. Bright spots in second-quarter demand included strong data center construction activity and uninterrupted infrastructure development. Additionally, its specialty strategy has yielded dividends as revenue from specialty equipment only declined 10.6%. We believe United Rentals' investment in specialty equipment will increase margins over the next decade as such equipment has lower price transparency as minimal competition exists in many markets. In the second quarter specifically, the net result of cost containment and fleet management was an impressive adjusted EPS of $3.68 versus the CapIQ consensus estimate of $1.93. Perhaps more important to our thesis was that year-to-date capital investment was a negative $31 million as United Rentals demonstrated that its fleet was highly fungible and effectively almost as good as cash. Management also reinstated guidance that was largely in line with our expectations and we are maintaining our fair value estimate of $177.

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Company Profile

Business Description

United Rentals is the world’s largest equipment rental company, and principally operates in the United States and Canada, where it commands approximately 13% share in a highly fragmented market. It serves three end markets: general industrial, commercial construction, and residential construction. United Rentals historically has provided its customers with equipment that was intermittently used, such as aerial equipment and portable generators. As the company has grown organically and through hundreds of acquisitions since it went public in 1997, its fleet now includes a range of specialty equipment. In 2019, United Rentals’ revenue was approximately $9.4 billion and its fleet included $14.6 billion of equipment at original cost.

100 First Stamford Place, Suite 700
Stamford, CT, 06902
T +1 203 622-3131
Sector Industrials
Industry Rental & Leasing Services
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2019
Stock Type Cyclical
Employees 19,100