United Rentals, Inc.’s URI shares gained 3.65% in the after-hours trading session on Jan 26, following better-than-expected fourth-quarter 2021 results. Better fleet absorption, higher revenues and stronger pricing helped the company end 2021 on a stronger note.
With respect to 2022 guidance, Matthew Flannery, CEO of United Rentals, said, “Our 2022 guidance reflects the optimism of our customers, as well as our confidence in leveraging our competitive advantages over the longer term. Our larger, more diverse value proposition should both benefit the top line and strengthen our levers for delivering strong margins, cash generation and returns in this new upcycle.”
Inside the Headlines
Adjusted earnings of $7.39 per share topped the consensus estimate of $6.91 by 6.9%. The reported figure also increased 46.6% from the prior-year figure of $5.04 per share.
Total revenues of $2.78 billion surpassed the consensus mark of $2.76 billion by 0.6% and grew 21.8% year over year. This upside reflects broad-based recovery in activity across end-markets served.
Rental revenues increased 24.7% from the year-ago quarter to $2.31 billion. Fleet productivity was up 10.3% year over year backed by better fleet absorption.
Used equipment sales decreased 17.8% from a year ago. Adjusted gross margin of 50.3% expanded 970 basis points (bps) due to higher pricing, which marked the fifth consecutive quarter of increase. Used equipment proceeds were 60.4% of original equipment cost or OEC.
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. Price, Consensus and EPS Surprise
United Rentals, Inc. price-consensus-eps-surprise-chart | United Rentals, Inc. Quote
Segment Discussion
General Rentals: Segment equipment rentals’ revenues grew 18.6% year over year to $1.699 billion. Rental gross margin expanded 220 bps year over year to 40.2%, courtesy of a decrease in depreciation, labor and repair expense (as a percentage of revenues).
Specialty/Trench, Power and Pump: Segmental rental revenues increased 45.3% year over year to $613 million. Rentals gross margin increased 70 bps on a year-over-year basis to 45.2% due to lower depreciation and labor expenses.
Margins
The company’s total equipment rentals gross margin rose 200 bps year over year to 41.5%.
Adjusted EBITDA also grew 26.2% from the prior-year quarter to $1,309 million. Adjusted EBITDA margin expanded 170 bps to 47.2% for the quarter owing to higher margins from rental revenues and used equipment sales.
2021 Highlights
Earnings came in at $22.06 per share, reflecting an increase of 26.5% from $17.44 a year ago. Total revenues were $9.72 billion, up from $8.53 billion in 2020. Rental revenues were up 14.9% from a year ago to $8.21 billion. Fleet productivity improved 10.4% year over year for the year.
Balance Sheet
United Rentals had cash and cash equivalents of $144 million as of Dec 31, 2021, down from $202 million at 2020-end. Total liquidity was $2.85 billion at 2021-end.
Cash from operating activities increased 80.5% year over year to $668 million for the quarter and 38.8% to $3.69 billion for 2021. Free cash flow fell 40.1% year over year to $260 million for the fourth quarter of 2021 and 38% to $1.51 billion for 2021. This downside was mainly due to higher net rental capital expenditures.
2022 Guidance
Total revenues are expected in the range of $10.65-$11.05 billion. This indicates an increase from $9.72 billion reported in 2021.
Adjusted EBITDA is projected between $4.95 billion and $5.15 billion. The current projection indicates a jump from the year-ago figure of $4.41 billion.
Net rental capital expenditures after gross purchases are now projected to be $1.85-$2.05 billion, indicating an increase from $2.03 billion in 2021.
Net cash provided by operating activities is anticipated in the range of $3.5-$3.9 billion, suggesting a rise from $3.69 billion in 2021.
Free cash flow (excluding the impact of merger and restructuring-related payments) is expected in the range of $1.5-$1.7 billion compared with $1.53 billion reported in 2021.
Zacks Rank
United Rentals currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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