Published on 26 Apr 2024 on Zacks via Yahoo Finance
Equipment Rentals Aids United Rentals (URI) in Q1 Earnings
United Rentals, Inc. URI witnessed a surge of 5.5% in its stock on Apr 25 trading session, following the release of its favorable first-quarter 2024 reports on Apr 24, 2024. This increase occurred despite broader indexes experiencing declines attributed to slower-than-expected GDP growth and increasing consumer prices.This largest equipment rental company reported first-quarter adjusted earnings per share of $9.15, ahead of the consensus mark by 9.6%, and total revenues were also modestly ahead of the mark by 2.1%. Earnings grew 15.1% year over year on 6.1% higher revenues in the quarter. EBITDA margin compressed 30 basis points (bps) year over year, mostly reflecting lower gross margin on used equipment sales. Nonetheless, margins in the core business remain healthy and Specialty gross margin, in particular, improved 200 bps from a year ago due to strong fixed cost absorption on higher revenues.(Read more: United Rentals Stock Up on Q1 Earnings & Revenue Beat)
Equipment Rentals Continues to Support Growth
Equipment Rentals segment revenues, which is its primary revenue source accounting for 84% of first-quarter revenues, experienced a robust 6.9% growth, which is well ahead of our expectation of 4.6% growth. This upside reflects broad-based demand, improved fleet productivity, higher original equipment costs or OEC, and Yak’s contribution despite weather disruptions in January. United Rentals' strategic acquisitions and extensive fleet have further strengthened its position as a market leader.Fleet productivity inched up 4% and average OEC increased 3.6% year over year. The company’s total equipment rentals’ gross margin expanded 110 bps year over year to 37.7% in the first quarter.Meanwhile, URI reported a 1.3% decrease (below our expectation of a 3.4% decline) in used equipment sales and a 9.1% increase (below our projection of 17.8% growth) in new equipment sales. The Used equipment sales produced an adjusted gross margin of 53.3%, which contracted 620 basis points (bps). The decrease in the year-over-year adjusted gross margin primarily resulted from the ongoing normalization of the used equipment market, which includes pricing adjustments.