Will United Rentals (URI) Miss Earnings Estimates in Q4? - Analyst Blog

United Rentals, Inc. (URI) is set to release fourth-quarter and fiscal 2014 results after the market closes on Jan 21.  In the last quarter, the Stamford, CT-based company delivered a 35% increase in earnings to $2.20 per share on the back of growth in both equipment rentals and sales of new equipment, services and other revenues, and sales of rental equipment.

The company had delivered a positive earnings surprise of 7.32% in the quarter, delivering four consecutive quarters of earnings surprises. United Rentals has delivered an average earnings surprise of 15.23% in the last four quarters. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

United Rentals will benefit from the acquisition of National Pump. The deal marks United Rentals' venture into the pump rental sector, catapulting it to the position of the second largest provider of pump rentals in North America. The sector looks promising given the rising demand from energy and petrochemical companies that are capitalizing on the booming shale gas market in the U.S. The deal is expected to be accretive to United Rentals’ free cash flow and earnings per share in 2014.

United Rentals will also gain from the implementation of growth strategies, higher rental rates, free cash flow generation, returning cash to shareholders and integrating acquisitions. Notably, the company will continue to focus on reducing the cycle time for renting equipment, improving accuracy, service quality and efficiency and cost control, which will lead to an increase in gross margin. The company is also poised to benefit from a rebound in non-residential construction.

For fiscal 2014, United Rentals expects revenues in the range of $5.55 billion to $5.65 billion. Adjusted EBITDA guidance for the full year is projected in the range of $2.65–$2.70 billion. The company expects an increase in rental rates of approximately 4.5% year over year and time utilization of around 68.5%.

Earnings Whispers

Our proven model does not conclusively show that United Rentals is likely to beat earnings estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for United Rentals is 0.00%. This is because the Most Accurate estimate of $2.06 is in line with the Zacks Consensus Estimate.

Zacks Rank: United Rental’s Zacks Rank #3 (Hold) when combined with 0.00% ESP, makes surprise prediction difficult. We caution investors against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement.

Stocks That Warrant a Look
 
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Owens Corning (OC) has an earnings ESP of 2.38% and a Zacks Rank #2 (Buy). It is expected to report its results on Feb 11.
 
Potlatch Corporation (PCH) has an earnings ESP of 7.50% and a Zacks Rank #3. It is slated to report its results on Jan 28.

Weyerhaeuser Co. (WY) has an earnings ESP of +3.57% and a Zacks Rank #3. It is scheduled to report its results on Jan 30.
 

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UTD RENTALS INC (URI): Free Stock Analysis Report
 
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