United Rentals' (URI) Q4 Earnings In Line, 2018 View Upbeat

Shares of United Rentals Inc. (NYSE:URI) fell 0.4% in after-hours trading following fourth-quarter 2017 earnings release. Earnings were in line with the Zacks Consensus Estimate but increased from the prior-year quarter owing to changes in tax laws and higher rental revenues.

Adjusted earnings of $3.34 (excluding the benefit associated with the enacted tax reform) were in line with the Zacks Consensus Estimate. Earnings, however, increased 25.1% year over year.

Revenues

Total revenues of $1.92 billion surpassed the Zacks Consensus Estimate of $1.88 billion by 2.1%. Revenues increased 26.3% year over year.

Rental revenues were also up 26.8% from the year-ago quarter to $1.65 billion. Volume of equipment on rent increased 28.7% and rental rates inched up 1.1%.

Margins

Total equipment rentals gross margin expanded 30 basis points (bps) year over year to 44.4%.

Adjusted EBITDA improved 26.4% year over year to $947 million and adjusted EBITDA margin increased 10 bps to 49.3% in the quarter.

Segment Discussion

General Rentals: Segment rental revenues increased 24.7% year over year to $1.4 billion. Segment equipment rentals’ gross profit rose 24.5% to $600 million. However, gross margin declined 10 bps year over year.

Trench, Power and Pump: Segmental rental revenues increased 38.7% year over year to $276 million, primarily on a same-store basis. Equipment rentals gross profit rose 45.6% to $131 million and gross margin improved 230 bps on a year-over-year basis.

Time Utilization & Fleet Size

Time utilization increased 70 bps to 70% from the year-ago level.

The size of the rental fleet was $11.5 billion of original equipment cost (OEC) as of Dec 31, 2017, compared with $8.99 billion as of Dec 31, 2016. The age of the rental fleet was 47 months on an OEC-weighted basis as of Dec 31, 2017, compared with 45.2 months as of Dec 31, 2016.

United Rentals, Inc. Price, Consensus and EPS Surprise

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

2017 Results

Adjusted earnings of $10.59 per share (excluding the benefit associated with the enacted tax reform) missed the Zacks Consensus Estimate of $10.60. The company reported net sales of $6.64 billion, up 15.3% year over year. Net sales slightly surpassed the Zacks Consensus Estimate of $6.60 billion.

Balance Sheet

United Rentals’ cash and cash equivalents totaled $352 million as of Dec 31, 2017, compared with $312 million as of Dec 31, 2016.

In the quarter, the company generated $2.2 billion of net cash from operating activities compared with $1.9 billion in the same period last year.

2018 Guidance

Total revenues are expected in the range of $7.3-$7.6 billion, higher than $6.64 billion reported in 2017.

Adjusted EBITDA is projected between $3.60 billion and $3.75 billion, higher than the prior-year adjusted EBITDA of $3.16 billion.

Net rental capital expenditures after gross purchases are projected in the range of $1.2-$1.35 billion.

Net cash provided by operating activities is expected in the range of $2.625-$2.825 billion, higher than $2.230 billion reported in 2017.

Free cash flow is expected in the range of $1.3-$1.4 billion, higher than $983 million reported in 2017.

Zacks Rank

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

Upcoming Peer Releases

Owens Corning (NYSE:OC) is slated to report quarterly results on Feb 14. The Zacks Consensus Estimate for earnings is pegged at $1.02, up 41.7% year over year.

Louisiana-Pacific (NYSE:LPX) is scheduled to release quarterly results on Feb 13. The Zacks Consensus Estimate for earnings stands at 58 cents, up 152.2% year over year.

Installed Building Products (NYSE:IBP) is expected to report quarterly results on Jan 26. The Zacks Consensus Estimate for earnings is pegged at 62 cents, up 40.9% year over year.

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