United Rentals Upgrade: Bank Of America Thinks Bearish Thesis Has Come To A Close
Bank of America has upgraded United Rentals from Underperform to Neutral after a dip in the stock’s share price dropped it to the firm’s $60 price target.
According to analyst Ross Gilardi, the firm’s bearish thesis has run its course, and the stock’s downside from current levels is limited.
United is now down more than 38 percent in 2015, and Caterpillar Inc. (NYSE: CAT)’s weak guidance this week sent United’s stock low enough for Bank of America to pull the plug on its bear thesis.
Gilardi pointed out that Caterpillar’s weakness has a lot to do with emerging market demand, and United is a North America pure-play. In addition, the company recently reported that August results were slightly above expectations.
United has admitted that rental prices will likely continue to fall into 2016. While declining prices will likely lead to downside earnings revisions for United, Bank of America believes that another round of earnings cuts are already baked into United’s share price.
Bearish On Other Names
While Bank of America believes that much of United’s business is isolated from the emerging market weakness that is weighing on Caterpillar, other names in the space aren’t so lucky.
Bank of America is also bearish on United’s highly-levered rental peer Neff Corp (NYSE: NEFF). “Neff is concentrated on the earthmoving equipment space, which is more directly tied to the Caterpillar profit warning, in our view,” Gilardi explained.
Disclosure: The author holds no position in the stocks mentioned.
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