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.