United Rentals (URI) Q2 Earnings & Revenues Beat, View Up

United Rentals Inc. (NYSE:URI) came up with better-than-expected results in the second quarter of 2017. The company’s earnings and revenues in the quarter also improved from the year-ago level buoyed by solid volume growth, record time utilization along with improved rate trend.

The company’s second-quarter 2017 adjusted earnings of $2.37 per share beat the Zacks Consensus Estimate of $2.31 by 2.6%. Earnings also increased 15% year over year.

Revenues

Total revenue of $1.59 billion surpassed the Zacks Consensus Estimate of $1.55 billion by 3%. Revenues increased 12.4% year over year.

Rental revenues were also up 13.5% from the year-ago quarter to $1.37 billion. Volume of equipment on rent increased 17.4%, while rental rates fell 1.2%.

Segment Discussion

General Rentals: Segment rental revenues increased 12.6% year over year to $1.14 billion. Segment equipment rentals’ gross profit increased 11.6% to $465 million. However, gross margin declined 40 basis points (bps) year over year.

Trench, Power and Pump: The company’s Trench, Power and Pump specialty segment's rental revenues rose 18.5% year over year to $224 million, primarily on a same-store basis. Segment equipment rentals gross profit rose 24.7% to $111 million and gross margin improved 250 bps year over year.

Time Utilization & Fleet Size

Time utilization increased 190 bps to 66% from the year-ago level, marking a record second quarter for the company.

The size of the rental fleet was $10.27 billion of original equipment cost as of Jun 30, 2017 compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 46.7 months on an OEC-weighted basis as of Jun 30, 2017 compared with 45.2 months as of Dec 31, 2016.

Margins

Total equipment rentals gross margin expanded 10 bps year over year to 42.1%.

Adjusted EBITDA was $747 million, up 10% from the second quarter of 2016. Adjusted EBITDA margin was 46.8%, down 100 bps from the prior-year quarter.

Balance Sheet

United Rentals’ cash and cash equivalents totaled $338 million as of Jun 30, 2017 compared with $312 million as of Dec 31, 2016.

In the quarter, the company generated $714 million of net cash from operating activities compared with $643 million for the same period last year. Free cash flow was $124 million, less than $165 million reported in the prior-year quarter.

2017 Guidance Updated

The company updated its 2017 outlook following the acquisition of NES Rentals.

Total revenue is now expected in the range of $6.25–$6.40 billion, higher than the prior range of $6.05–$6.25 billion.

Adjusted EBITDA is projected between $2.950 billion and $3.025 billion compared with the prior expectation of $2.835–$2.985 billion.

Net rental capital expenditures after gross purchases are likely to be in the range of $1.05–$1.15 billion, higher than $925 million to $1.075 billion expected earlier.

Net cash provided by operating activities is expected in the range of $1.975–$2.175 billion, more than $1.85 billion to $2.05 billion expected earlier.

Free cash flow is expected in the $825 million to $925 million range, higher than $800 million to $900 million expected earlier.

United Rentals, Inc. Price, Consensus and EPS Surprise

United Rentals, Inc. Price, Consensus and EPS Surprise | United Rentals, Inc. Quote

Zacks Rank

United Rentals carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Upcoming Peer Releases

Owens Corning (NYSE:OC) is slated to release its quarterly results on Jul 26. The Zacks Consensus Estimate for the to-be-reported quarter is currently pegged at $1.05.

Patrick Industries, Inc. (NASDAQ:PATK) is scheduled to release its quarterly results on Jul 27. The Zacks Consensus Estimate for the to-be-reported quarter is currently pegged at $1.16.

CalAtlantic Group, Inc. (NYSE:CAA) is slated to release its quarterly results on Jul 27. The Zacks Consensus Estimate for the to-be-reported quarter is currently pegged at 78 cents.

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