On Jun 7, Zacks Investment Research upgraded United Rentals, Inc. URI to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The upgrade came on the back of positive estimate revisions following United Rentals attaining a new 52-week high of $106.73 on Jun 5, also an all-time high. The equipment rental company is benefiting from a construction boom.
Share price and earnings estimates of United Rentals have been on the rise since the company reported a massive 55% year-over-year increase in its first-quarter adjusted earnings to 90 cents per share on Apr 16. Results also beat the Zacks Consensus Estimate of 70 cents. The company has outperformed the Zacks Consensus Estimate in each of the four trailing quarters with an average surprise of 13.07%.
During the first quarter, the company repurchased $43 million worth of shares under its $500 million share repurchase program. United Rentals plans to complete the program by Apr 2015. Further share repurchases will provide support to the stock.
For fiscal 2014, United Rentals expects revenues in the range of $5.45 billion to $5.65 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is projected in the range of $2.55–$2.65 billion. The company expects a year-over-year increase of approximately 4% in rental rates and time utilization of around 68.5%.
United Rentals will benefit from the acquisition of National Pump which marks it foray into the pump rental sector, catapulting it to the position of the second largest provider of pump rentals in North America. The deal is expected to be accretive to United Rentals' free cash flow and earnings per share in 2014.
In addition, United Rentals acquired the Power and HVAC (Heating, ventilation and air conditioning) assets of Blue-Stream Services, LLC on May 6. The acquisition will help in the expansion of United Rentals' footprint in the Gulf region and offers significant cross-selling opportunities.
Notably, the company will continue to focus on reducing the cycle time for renting equipment, improving accuracy, service quality and efficiency as well as cost control, which will lead to an increase in gross margin. Additionally, the company is also poised to benefit from improvement in non-residential construction.
Estimate Revisions
Over the last 60 days, all the 9 estimates available for 2014 and 2015 underwent positive revisions. Consequently, the Zacks Consensus Estimate for 2014 went up 5% to $6.47 and for 2015, it went up 5% to $8.07.
Other Stocks to Consider
Some other stocks worth considering in the sector include Gibraltar Industries, Inc. ROCK, Simpson Manufacturing Co., Inc. SSD and The New Home Co. LLC NWHM. While Gibraltar and Simpson Manufacturing have a Zacks Rank #1 (Strong Buy), The New Home Company carries a Zacks Rank #2 (Buy).
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