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
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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