United Rentals, Inc. URI is scheduled to report its third-quarter 2024 results on Oct 23, after market close.

In the last reported quarter, its adjusted earnings beat the Zacks Consensus Estimate by 2.1% but revenues missed the same by 0.02%. On a year-over-year basis, the top and bottom lines grew 6.2% and 8.3%, respectively.

The company’s earnings surpassed estimates in the trailing four quarters, the average surprise being 4.8%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

How Are Estimates Placed for URI?

The Zacks Consensus Estimate for third-quarter adjusted earnings has increased to $12.49 per share from $12.46 over the past 60 days. The projected figure indicates a 6.5% increase from the year-ago quarter’s earnings of $11.73 per share.

The consensus estimate for revenues is pegged at $3.99 billion, indicating growth of 6.1% from the prior-year quarter’s level.

United Rentals, Inc. Price and EPS Surprise

United Rentals, Inc. price-eps-surprise | United Rentals, Inc. Quote

Factors at Play for United Rentals’ Quarterly Results

Revenues: United Rentals’ third quarter is expected to gain from growth in its Specialty business (which contributed 29.7% to second-quarter total revenues) and disciplined capital allocation. While local market challenges in General Rentals (which contributed 70.3% to second-quarter 2024 total revenues) and the normalization of used equipment margins present headwinds, the company’s diversified model and a strong pipeline of large projects provide confidence for continued profitable growth in the quarter.

While the Specialty business is performing well, General Rental revenues have been stagnant. This segment is more sensitive to local market dynamics, and the company acknowledged challenges in some regions. Despite efforts to manage fleet allocation, the General Rental business remains vulnerable to local market conditions, making it more vulnerable to regional economic fluctuations compared to the more resilient and diversified Specialty segment. Local construction and industrial activities, which are key drivers for General Rentals, are showing signs of softness in certain areas, primarily due to higher interest rates.

Also, United Rentals has consciously shifted a substantial portion of its growth focus and capital expenditure toward its Specialty business. The company invested significantly in cold starts and expanded its Specialty fleet, which is expected to contribute to higher margins and offer more growth opportunities.
 
Segment-wise, our model predicts third-quarter revenues for General Rentals and Specialty to increase year over year by 6.2% to $2.92 billion and 6.7% to $1.08 billion, respectively.

The Equipment Rentals business — which accounted for 85.2% of second-quarter total revenues — is likely to have witnessed decent demand trend across the segments on the back of increased fleet productivity and average OEC. Apart from Equipment Rentals, other revenue sources include sales of rental equipment, new equipment, contractor supplies and service and other revenues.

For the third quarter, we expect revenues from Equipment Rentals to increase 5.1% year over year to $3.39 billion. The revenues for Sales of Rental Equipment, New Equipment Sales, Contractor Supplies Sales, and Service & Other Revenue are expected to increase 4.3%, 11.1%, 6.4% and 59.6%, respectively, from the year-ago quarter.

The Yak acquisition is likely to have enhanced United Rentals’ position in the North American matting industry and boosted the Specialty segment's performance. Its multi-year tailwinds in infrastructure, manufacturing, and energy and power are encouraging. Besides this, the company’s efficient use of its competitive advantages and effective implementation of its strategies, including generating strong free cash flow and rewarding shareholders, are likely to have boosted its performance in the quarter.

Earnings & Margins: The bottom line of United Rentals is expected to have fared well in the third quarter, given the significant leverage from the increased top line, decreases in certain discretionary expenses, including travel and entertainment and cost-effective performance. Yet, increases in the cost of revenues, higher SG&A expenses and interest expenses are likely to have partially offset the tailwinds.

We expect adjusted EBITDA to grow 3.3% year over year to $1.91 billion but adjusted EBITDA margin to decline to 47.7% in the third quarter from 49.1% a year ago. Also, the gross margin is expected to contract to 41.3% from 42.1% a year ago.