United Rentals (URI 129.25, -9.79, -7.04%) began lower by 4.8% as
lower cash flow guidance for the fiscal year overshadows solid results and
improved revenue guidance. The early weakness has sent the stock to a 13-month
North America's largest tool and equipment rental company reported above-consensus third quarter earnings of $4.74 per share on a 19.8% year/year jump in revenue to $2.12 bln, which also exceeded estimates.
The company boosted its revenue guidance for the fiscal year, expecting sales between $7.77 bln and $7.87 bln, up from previous guidance for revenue between $7.64 bln and $7.84 bln. The new guidance range is ahead of market expectations, but it was overshadowed by lower free cash flow guidance. United Rentals now expects fiscal-year free cash flow between $1.25 bln and $1.35 bln, down from previous guidance for free cash flow between $1.3 bln and $1.4 bln.
Third quarter rental revenue grew 21.2% year/year to $1.86 bln. Owned equipment rental revenue grew 20.3% thanks to a 17.8% increase in volume and 2.1% growth in rental rates. Total equipment rental gross margin improved to 45.5% from 44.9%.
Including the acquisitions of NES Rental Holdings, Neff Corporation, and BakerCorp, rental revenue grew 10.9% thanks to a 7.4% increase in rental volume and 2.1% growth in rental rates.
Time utilization declined 100 basis points to 70.9% due to the impact of Neff and BakerCorp acquisitions.
General Rentals revenue grew 16.7% to $1.44 bln while gross margin improved to 43.6% from 42.4%.
Trench, Power, and Fluid Solutions rental revenue jumped 39.5% to $417 mln with same store growth of 12.7%. Segment gross margin weakened by 250 basis points to 52.3% due to the impact of the BakerCorp acquisition and growth in lower-margin fuel revenue.
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