United Rentals (URI) To Report Q4 Earnings: What's In Store?

United Rentals, Inc. (NYSE:URI) is scheduled to report fourth-quarter 2018 results on Jan 23, after market close.

The company surpassed the Zacks Consensus Estimate by 4.4% in the last reported quarter. In fact, United Rentals has a strong earnings and revenue surprise history. It surpassed earnings as well as revenue expectations in six of the past seven quarters.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the quarter to be reported is currently pegged at $4.77, having increased 1.5% over the past 60 days. This also reflects an increase of 42.8% from the year-ago earnings of $3.34 per share. Revenues are expected to be $2.21 billion, up 15.2% year over year.

Let’s delve into other factors that are likely to drive the company’s results in the fourth quarter.

Overall, United Rentals is expected to witness robust growth in the soon-to-be-reported quarter, courtesy of strength in non-residential construction activity, particularly in the commercial and infrastructure sectors, along with a rebound in industrial activity.

Strong End-Market Demand: United Rentals has been benefiting from robust demand across construction and industrial verticals in the United States, as well as Canada. The company has been witnessing sustained demand from infrastructure projects throughout multiple regions in both the United States and Canada. This is evident from its solid top-line growth (up 21.7% in the first nine months of 2018), given strong gains in volume and rates. In fact, rental revenues also grew 21.7% year over year in the same time frame. Owned equipment rental revenues also increased 21.4%, reflecting 19.6% and 2.3% growth in the volume of equipment on rent and rental rates, respectively.

The company has been reporting positive rental rates since the beginning of 2018, after witnessing negative rates for several quarters. We expect positive rental rates to be reflected in its fourth-quarter results as well. Factors such as strong organic growth, led by improving end-market demand and acquisitions, are likely to help the company record an improvement in rates.

Equipment Rentals, comprising about 86% of its total revenues, is expected to get a boost in the fourth quarter. The Zacks Consensus Estimate for Equipment Rentals revenues of $1.89 billion reflects sequential growth of 1.8% and a year-over-year rise of 15.1%.

Solid Inorganic Strategy to Aid Top-Line Growth: United Rentals made five acquisitions during 2018, which are likely to boost its general rentals and specialty segments. United Rentals follows systematic inorganic strategies to expand its geographic borders and product portfolio. The most recent buyout is the BlueLine acquisition carried out in October 2018. This acquisition will boost the company’s capacity across the largest metropolitan areas in North America, including both U.S. coasts, the Gulf South and Ontario.

Cost-Saving Efforts to Boost Bottom-Line Growth: Project XL initiatives (a set of eight specific work streams to drive growth through revenue opportunities and generate profits via cost savings), prudent investments in fleet, accretive acquisitions as well as robust demand work in favor of the company. United Rentals had earlier expected to complete the restructuring program in 2018. It does not expect to incur significant additional expenses in connection with the program.

What Does the Zacks Model Unveil?

Our proven model does not show that United Rentals is likely to beat earnings estimates in the to-be-reported 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 currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%, making surprise prediction difficult. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revision momentum.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Meritage Corporation (NYSE:MTH) has an Earnings ESP of +1.08% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Jan 30.

Taylor Morrison Home Corporation (NYSE:TMHC) has an Earnings ESP of +25.00% and a Zacks Rank #3. The company is expected to report quarterly numbers on Feb 6.

Gates Industrial Corporation PLC (NYSE:GTES) has an Earnings ESP of +6.10% and holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is slated to report quarterly results on Feb 12.

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