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.
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.
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.