United Rentals (URI) Q1 Earnings: What's In The Cards?

United Rentals, Inc. (NYSE:URI) is scheduled to report first-quarter 2018 results on Apr 18, after market closes.

Last quarter, the company’s earnings met the Zacks Consensus Estimate. The company surpassed expectations in three of the trailing four quarters, the average being 3.68%.

In fact, shares of United Rentals have rallied 20.6% in the last six months, breezing past its industry’s gain of only 4.9%.

Let’s delve deeper into factors that are likely to affect the company’s Q1 earnings.

In the third as well as fourth quarter, the company posted positive rental rates after eight straight quarters of negative rates. We expect the first-quarter results to reflect positive rental rates as well. Factors such as strong organic growth led by improving end-market demand and acquisitions (NES Rentals and Neff Corporation) are likely to help the company witness an improvement in rates.

The company’s core general rental business has been performing well and commercial construction remains robust. Meanwhile, continued strength in rig infrastructure is also expected to be a major tailwind for the to-be-reported quarter.

Equipment Rentals, comprising about 86% total revenues, is expected to get a boost in the first quarter. The Zacks Consensus Estimate for Equipment Rentals revenues of $1.5 billion reflects year-over-year growth of 25.3%. Sequentially, Equipment Rentals revenues are expected to decline 11.2%.

The consensus estimate for rental equipment sales is $130 million, indicating an increase from $106 million a year ago. However, sales of new equipment are expected to decrease from $172 million in the preceding quarter. Contractor Supplies revenues will likely witness 3.8% growth year over year but are expected to be down 6.6% sequentially. Service and Other revenues are expected to rise 25.4% from the prior-year quarter and 5.8% sequentially.

Project XL initiatives, prudent investments in fleet, accretive acquisitions and robust market demand enhance United Rentals’ prospects.

Moreover, the company has been experiencing a growing demand in its core construction and industrial sectors. Commercial construction has been strong of late. The upstream oil and gas company is also gaining traction on improving macro conditions. Thus, demand for United Rentals’ products is expected to increase, thereby driving revenues in the to-be-reported quarter.

Analysts polled by Zacks expect net sales of $1.67 billion in the said quarter, up 23.3% from the year-ago quarter. For the quarter, the consensus estimate for earnings is pegged at $2.43 per share, implying significant 48.2% growth.

What Does the Zacks Model Unveil?

Our proven model shows that United Rentals is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

United Rentals has an Earnings ESP of +1.58% and a Zacks Rank #2, which makes us reasonably confident of an earnings beat. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks Worth a Look

Here are a few other construction stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

D.R. Horton, Inc. (NYSE:DHI) has an Earnings ESP of +1.72% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is set to report quarterly results on Apr 26.

Meritage Homes Corporation (NYSE:MTH) has an Earnings ESP of +0.31% and a Zacks Rank #3. The company is slated to report quarterly results on Apr 25.

M.D.C. Holdings, Inc. (NYSE:MDC) has an Earnings ESP of +1.89% and boasts a Zacks Rank #2. The company is set to report quarterly results on May 3.

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