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United Rentals Rose ~7%, Q1 Earnings Beat Estimates

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United Rentals

United Rentals (URI) stock rose ~7% during after-hours trading on April 17. The company announced strong first-quarter results. United Rentals’ top and bottom lines beat analysts’ estimates and marked a significant YoY (year-over-year) improvement.

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For the quarter, the company reported an adjusted EPS of $3.31, which was 15.3% higher than the adjusted EPS of $2.87 in the first quarter of 2018. United Rentals’ adjusted EPS beat analysts’ consensus estimate of $3.03.

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What drove the earnings higher?

Higher revenues and increased rental rates mainly drove United Rentals’ first-quarter earnings. The company’s total revenues of $2.12 billion beat analysts’ estimate of $2.06 billion and increased 22% YoY due to the Equipment Rentals segment’s strong performance.

The Equipment Rentals segment accounted for 85% of United Rentals’ first-quarter revenues. The segment’s sales grew 23% YoY to ~$1.8 billion due to incremental revenues from last year’s acquisitions of BakerCorp and BlueLine. Higher rental rates and increased volumes also supported the segment’s revenue growth.

The first-quarter adjusted gross margin fell by 510 basis points to 49%. Last year, the company recorded a higher gross margin due to sales of more fully depreciated assets in 2018.

The adjusted EBITDA for the quarter grew 18.1% YoY to $921 million. The adjusted EBITDA margin contracted by 150 basis points to 43.5% due to a slightly negative impact from acquisitions made in 2018.

Peers’ expectations

Analysts expect slower earnings growth for most of United Rentals’ industrials (XLI) peers. Caterpillar (CAT) and Crane (CR) will likely register 1% and 6.4% YoY growth in their respective first-quarter adjusted EPS. CIRCOR International (CIR) is expected to report a 6.3% YoY decline in its EPS. These companies recorded strong double-digit earnings growth in the previous four quarters.

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