Axiom Saw A Positive Surprise In United Rentals Earnings

The company's second-quarter adjusted EPS of $2.06 handily beat Street view of $1.82 and revenue of $1.42 billion also topped consensus estimate of $1.4 billion.

"Overall, URI's General Rentals business saw revenue fall y/y, and gross profit fall both sequentially and y/y, missing our low-end ests. Yet, the positives were in better Trench, Power, and Pump ('TPHP') numbers, which beat our ests., and continued equipment sales (somewhat of a surprise given our checks suggest there is a lot of excess equipment out there)," analyst Gordon Johnson wrote in a note.

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For 2016, the company continues to expect total revenue in a range of $5.6 billion to $5.8 billion, and adjusted EBITDA in a range of $2.65 billion to $2.75 billion.

"All of this resonated in a reiteration of the full-year guidance, which, given how bad the Rouse data has been, as well as talk of sizeable oversupply, is somewhat of a positive surprise," Johnson said.

The company lowered the expected rental rate decline for 2016 (a positive for earnings), while also lowering its expected time utilization of the fleet (a negative for earnings), essentially offsetting each other.

The rental rates would be the focus of the company's conference call as rental rate growth is seasonally weaker in the third and fourth quarters. The company mentioned that May and June saw sequential month-over-month growth of 50bps and 60bps, respectively.

"However, this is a bit misleading, we believe, as rental rate growth is seasonal, and typically strong in May and June, falling through the rest of the year," the analyst noted.

Shares closed Wednesday's trading at $69.86. At time of writing, United Rentals was up 14.03 percent on the day, trading at $79.66.

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