UPDATE: Morgan Stanley Initiates Coverage on United Rentals on FCF Allocation/Capex Discipline

In a report published Thursday, Morgan Stanley analyst Nicole DeBlase initiated coverage on United Rentals URI with an Equal-Weight rating and $60.00 price target. In the report, Morgan Stanley noted, “We believe FCF allocation/capex discipline is key to the investment story. In our view, several factors have changed at the company, making this a possibility during the upcoming investment cycle, but we ultimately feel that this is a ‘show me story'. We believe URI is dependent upon a Non-Resi end market pickup to achieve its cost of capital. Even then, we do not forecast an ROIC above 10% until at least 2017e. In our view, it is difficult to compare rental rates across companies, so investor concerns over pricing pressure are likely overblown. Instead, we monitor used equipment pricing, which has been relatively stable recently.” United Rentals closed on Wednesday at $56.13.