United Rentals Is Up 43% Since Early February, But Oppenheimer Is Stepping Off Gas Pedal

While the read on United Rentals, Inc. URI for the last year is not very attractive, with the stock down more than 33 percent, over the last few weeks, the issue has rebounded handsomely.

Since early February, United Rentals is up 43 percent— a nice change of scenery.

However, despite its recent run, Oppenheimer is changing its rating on the company and "stepping to the sidelines."

Rating And Justification

"URI has appreciated 43 percent since its recent 2/11/16 trough," Oppenheimer analysts led by Scott Schneeberger said. "It's benefited disproportionately (S&P 500 +13 percent over same period), given its low starting point from uninspiring 2016 guidance (on 1/27/16)/relatively high beta/elevated correlation with oil prices."

Based upon historic seasonality performances and the "disproportionate" run, Oppenheimer is downgrading the stock to Perform from a previous Outperform rating, and subsequently removing its price target on the stock.

Related Link: Citi Adds United Rentals To Focus List Amid Machinery Stock Rally

Furthermore, the firm has stated that even if first-quarter numbers come in strong, the analysts are "wary it wouldn't be sufficient to further invigorate its stock meaningfully."

"We believe industry leader URI has been true to its 2016 guidance of n/minimal traditional rental equipment capex in 2016 thus far, a positive step toward reducing the over-fleeting issue in the industry," the analysts explained. "However, the traditional rental equipment industry is highly fragmented, and while we infer industry progress, we have minimal visibility into discipline across the spectrum of competitors at this juncture."

Taken together, particularly after URI's strong stock price appreciation over the past month, we're stepping to the sidelines ahead of 1Q16, awaiting a more opportune entry point and/or enhanced visibility of a significantly improved operating environment," the analysts concluded.

At time of writing, United Rentals was down roughly 3 percent on the day, trading at $60.31.