QUOTE AND NEWS
Market Intelligence Center  Jul 9  Comment 
MarketIntelligenceCenter.com's option-trade picking algorithms have identified an attractive covered-call trade on United Rentals Inc. (URI). Look at the Sep. '15 $77.50 covered call for a net debit in the $74.15 area. This trade has a duration...
Market Intelligence Center  Jul 2  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered-call trade on United Rentals Inc. (URI) that includes 7.54% downside protection. Sell one contract of the...
TheStreet.com  Jul 1  Comment 
NEW YORK (TheStreet) -- United Rentals stock was downgraded by analysts at Pacific Crest Securities to "sector weight" from "overweight." There are several factors that led to a slower-than-expected ramp in construction activity, including...
Market Intelligence Center  Jun 30  Comment 
United Rentals Inc. (URI) presents a trading opportunity that offers a 2.94% return in just 52 days. A covered call on United Rentals at the $82.50 level expiring on Aug. '15 offers an assigned return rate of 2.94% or 20.67% annualized. This...
Benzinga  Jun 26  Comment 
Below are the top rental & leasing services stocks on the NYSE in terms of return on investment. The trailing-twelve-month return on investment at United Rentals, Inc. (NYSE: URI) is 11.00 percent. United Rentals' operating margin for the same...
Forbes  Jun 16  Comment 
In afternoon trading on Tuesday, Industrial stocks are the worst performing sector, higher by 0.2%. Within the sector, United Rentals, Inc. (NYSE: URI) and American Airlines Group Inc (NASD: AAL) are two large stocks that are lagging, showing a...
TheStreet.com  Jun 16  Comment 
NEW YORK (TheStreet) -- Shares of United Rentals  are declining 2.80% to $88.59 in afternoon trading on Tuesday after Jefferies lowered its price target to $120 from $130 with a "buy" rating. United Rentals, a holding company engaged in the...
Forbes  Jun 16  Comment 
In early trading on Tuesday, shares of Aetna (AET) topped the list of the day's best performing components of the S&P 500 index, trading up 4.8%. Year to date, Aetna registers a 42.8% gain.




 

United Rentals (NYSE:URI) rents construction equipment like aerial work platforms and forklifts. Its primary revenue sources are private commercial and residential construction companies, but it also rents to public clients like municipalities and utilities. URI rents over 2,900 different classes of equipment[1] and holds about 10% of the equipment rental industry by revenue, the biggest share of any company in this segment.[2] URI's large equipment fleet and geographic reach across the United States, Canada, and Mexico allow it to create an extensive equipment sharing network, maximizing usage and reducing the amount of equipment needed at each rental location.[3]

United Rentals is exposed to the cyclical nature of the residential and commercial construction industries, but not in the same way as builders or equipment manufacturers. Downturns in the economy which hurt these industries mean slower demand for construction equipment. However, recessions provide increased incentives to rent rather than purchase equipment, which spurs demand for United Rentals' products and services.

Business Overview

United Rentals's rental units include general construction and industrial equipment like backhoes, forklifts and earth moving equipment; aerial work platforms, such as scissor lifts and boom lifts; general tools and light equipment such as pressure washers, heaters and hand tools; and trench safety equipment[4]. The company operates 697 retail locations throughout the United States, Mexico and Canada, offering over 260,000 units of construction equipment[5]. Although United Rentals is primarily a rental company, the company also sells new and used equipment, contractor supplies and provides equipment service and maintenance.

Business & Financial Metrics[6]

In 2009, URI saw a net loss of $62 million on $1.75 billion in total revenue. This represented a reduction in annual losses of 93.4% from a $943 million loss on $2.15 billion in 2008.

Business Segments[7]

URI operates through two reportable business segments:

  • General Rentals (84.8% of operating income): This segment rents out construction, aerial, industrial, and home maintenance equipment in addition to providing associated services.
  • Trench Safety, Power and Pumps (15.6% of operating income): This segment rents out specialty construction products and provides associated services. This segment's operating margin is consistently higher than the General Rentals segment.

IMAGE:URI-Segments2009.jpg[8]

Key Trends and Forces

Cyclical Nature of Construction Industry Causes Rental Demand to Fluctuate

United Rentals primarily rents its equipment to the commercial construction industry, with 90% of its revenue earned in this industry[9]. Any decreases in the demand for construction resulting from macroeconomic factors like an economic recession, increased cost of construction materials, adverse weather conditions or an increase in interest rates will hurt the demand for construction equipment rentals. For example, the seasonality of the Commercial Real Estate construction industry, with lower construction in the winter months, causes demand for equipment rentals to fall as well during the winter. Conversely, factors such as an economic downturn actually increase incentive for companies to rent rather than purchase construction equipment.

Rising Fuel Costs Hurts Rental Demand and Gross Margin

United Rentals maintains low inventory costs by grouping branches in groups of 6 to 12 according to geographic location[10]. These groups share construction equipment, minimizing equipment idle time. United Rentals therefore relies on a highly mobilized fleet, which would be hampered by increased Oil Prices. Higher costs of fuel increase operating costs of equipment rentals, which then reduce United Rentals's gross margin. Also, rising fuel prices indirectly lowers equipment rental demand by raising the costs of steel and affecting major construction suppliers like US Steel (X).

Growth of Construction Equipment Rental Industry Leads to More Sales

The construction equipment rental industry in the United States has increased at a 10% compound annual growth rate since 1990[11]. Particularly in an economic downturn, construction equipment rental becomes a better option for builders for several reasons:

  • Companies do not have to make large capital investments needed to purchase equipment
  • Rental companies offer a highly diverse selection of equipment and therefore provide the ability to best suit the needs of a specific job
  • Renting equipment minimizes storage and transportation costs
  • Renting equipment provides constant access to new technology without having to reinvest in new equipment[12].

United Rentals, the largest equipment rental company by revenue, is poised to prosper from significant growth in the equipment rental industry as its broad geographic footprint and large equipment fleet lead to the acquisition of new customers much easier than its primarily localized competition which lack similar nationwide reach and brand recognition.

Acquisitions and Geographic Expansion

United Rentals has made five major acquisitions since 2005. High Reach Equipment Services, LLC, an aerial equipment supplier was acquired in 2007, the company's latest acquisition in an effort to expand their services geographically by acquiring smaller equipment rental companies nationwide[13]. By expanding geographically, United Rentals seeks to achieve higher brand recognition and higher efficiencies in resource sharing between branches.

Competition

The equipment rental industry is dominated mainly by small, independent businesses with only one or two rental locations. Major publicly traded competitors include Hertz Global Holdings (HTZ) and RSC Holdings, Inc.

  • Hertz most commonly associated with car rentals, rents construction equipment across North America and Europe.
  • RSC Holdings, Inc. competes with United Rentals across North America.
  • Equipment vendors and dealers like Caterpillar (CAT) sell and rent equipment directly to consumers also compete with United Rentals.

References

  1. United Rentals 2007 10-K, Item 1, pg. 1
  2. Calculated by dividing URI 2007 revenue by total 2007 industry revenue, United Rentals 2007 10-K, Item 1, pg. 1
  3. United Rentals 2007 10-K, Item 1, pg. 3
  4. United Rentals 2007 10-K, Item 1, pg. 1
  5. 2007 10-K, Item 1, pg. 1
  6. URI 2009 10-K pg. 49  
  7. URI 2009 10-K pg. 6  
  8. URI 2009 10-K pg. 37  
  9. United Rentals 2007 10-K, pg. 6
  10. United Rentals 2007 10-K, Item 1, pg. 3 and pg. 16
  11. United Rentals 2007 10-K, Item 1, pg. 3
  12. United Rentals 2007 10-K, Item 1, pg.3
  13. United Rentals 2007 10-K, pg. 53
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