Yahoo Finance United Rentals (NYSE:URI) Posts Q2 Sales In Line With Estimates
Equipment rental company United Rentals (NYSE:URI) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 6.2% year on year to $3.77 billion. The company's outlook for the full year was also close to analysts' estimates with revenue guided to $15.2 billion at the midpoint. It made a non-GAAP profit of $10.70 per share, improving from its profit of $8.59 per share in the same quarter last year.
Is now the time to buy United Rentals? Find out in our full research report.
United Rentals (URI) Q2 CY2024 Highlights:
Revenue: $3.77 billion vs analyst estimates of $3.78 billion (small miss)
EPS (non-GAAP): $10.70 vs analyst estimates of $10.51 (1.8% beat)
The company reconfirmed its revenue guidance for the full year of $15.2 billion at the midpoint
EBITDA Guidance for the full year is $7.17 billion at the midpoint, in line with analysts' expectations
Gross Margin (GAAP): 40.2%, down from 40.7% in the same quarter last year
Free Cash Flow of $196 million, down 77.1% from the previous quarter
Market Capitalization: $49.54 billion
Matthew Flannery, chief executive officer of United Rentals, said, “We were pleased with our record second-quarter results across revenue, adjusted EBITDA and EPS, as 2024 continues to play out as we expected. The integration of Yak remains on track. This acquisition builds upon our one-stop shop strategy of providing customers a best-in-class rental experience through our general rentals and specialty offerings. The team’s steadfast focus on providing this unique value proposition to our customers, coupled with an unwavering focus on safety, operational excellence and innovation, remains the cornerstone of our strategy and enables us to drive long-term shareholder value.”
Headquartered in Stamford, CT, United Rentals (NYSE:URI) provides equipment rental and related services to various industries including construction, industrial, and infrastructure.
Specialty Equipment Distributors
Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.
Sales Growth
Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, United Rentals's sales grew at an impressive 10.8% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows United Rentals's offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. United Rentals's annualized revenue growth of 17.6% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
This quarter, United Rentals grew its revenue by 6.2% year on year, and its $3.77 billion of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
United Rentals has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 25.3%. This isn't surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, United Rentals's annual operating margin rose by 5.1 percentage points over the last five years, showing its efficiency has significantly improved.
In Q2, United Rentals generated an operating profit margin of 26.6%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPS
We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
United Rentals's EPS grew at an astounding 23.8% compounded annual growth rate over the last five years, higher than its 10.8% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into the nuances of United Rentals's earnings can give us a better understanding of its performance. As we mentioned earlier, United Rentals's operating margin was flat this quarter but expanded by 5.1 percentage points over the last five years. On top of that, its share count shrank by 15%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For United Rentals, its two-year annual EPS growth of 27.1% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, United Rentals reported EPS at $10.70, up from $8.59 in the same quarter last year. This print beat analysts' estimates by 1.8%. Over the next 12 months, Wall Street expects United Rentals to grow its earnings. Analysts are projecting its EPS of $39.05 in the last year to climb by 14.9% to $44.88.
Key Takeaways from United Rentals's Q2 Results
Although its EPS beat, we struggled to find many strong positives in these results. Its revenue was in line with estimates while its full-year guidance was relatively unchanged. We think this was a decent quarter, showing the company is staying on target. The stock remained flat at $722.50 immediately following the results.
So should you invest in United Rentals right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
