Why you should keep United Rentals (URI) despite the drop in the stock price
The construction sector had a mixed performance for the year 2021. Housing and related industries saw strong demand trends as well as supply chain disruptions and a shortage of skilled labor. . United Locations Inc. URI, the world’s largest rental equipment company, has also witnessed the same.
The business is grappling with higher fuel costs, increased operating expenses and competitive pressure. In addition, the volatility of the energy market and the cyclical nature of the business are pressing concerns.
Defying all odds arising from the COVID-19 pandemic and other industry woes, URI is expected to benefit from a large and diverse rental fleet, enabling it to serve a wide range of customers across the globe. . A significant increase in infrastructure and public construction spending, strong end-market demand, an expansion strategy as well as an acceleration in underlying activity are gaining ground.
Image source: Zacks Investment Research
Company shares are down 8.6% in past three months against the Zacks Construction products – Miscellaneous the industry’s 5.7% rise. While investors are a little pessimistic about its share price falling over the past three months, the earnings outlook for 2022 is looking good. The company has a strong outlook, as evidenced by Zacks’ consensus estimate of $ 26.34 per share in 2022, which has improved 2.3% in the past 30 days. This indicates growth of 20.2% year over year. URI has a strong history of exceeding revenue estimates. Its profits have exceeded analysts’ expectations in 12 of the past 15 quarters.
Along with impressive prospects for next year, United Rentals has a solid VGM score de A. In addition, the company is an excellent choice in terms of growth and value investing, supported by a growth and value score of A.
Another indication of growth potential is the 12 month return on equity (âROEâ) of URIs. ROE over the past 12 months is 28.9% versus 9.4% for the industry, reflecting efficient use of its shareholders’ funds.
Here are some factors that support the growth of this Zacks Rank # 3 (Hold) business. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Biden infrastructure move
United Rentals is expected to benefit from strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle of global supply chain investments. Importantly, United Rentals is expected to continue to maintain positive momentum in the near term, as the company’s solutions are closely aligned with President Biden’s policies and industry trends.
Strong underlying activity
For the first nine months of 2021, equipment rentals represented 84.5% of total revenue. There has been a return to activity in the manufacturing sector of United Rentals after more than a year of industrial recession. The construction verticals, which have been the most resilient amid the COVID-19 pandemic, are as strong as ever. In terms of end markets, solid activity was seen in the energy, HVAC, pharmaceutical, biotech, warehousing, distribution, data center and hospital sectors. Non-residential construction (the company’s biggest revenue base) has improved in recent times. He has witnessed a growing demand for specialty construction products, which contribute significantly to the revenue of the trench, power and fluid solutions segment. Additionally, demand for used equipment has remained strong, following the easing of restrictions linked to the pandemic.
United Rentals is expanding its geographic boundaries and product portfolio through acquisitions and joint ventures. The company offers approximately 4,300 classes of rental equipment for rent by the hour, day, week or month.
On May 25, URI’s subsidiary, UR Merger Sub VI Corporation, acquired General Finance Corporation. General Finance, which operates as Pac-Van and Container King in the United States and Canada, and as Royal Wolf in Australia and New Zealand, is a leading provider of mobile storage as well as modular office spaces. United Rentals should benefit from the expertise of General Finance in different markets. In addition, the acquisition strengthened its growth capacity and gave the company a leading position in the mobile storage rental market as well as office solutions.
Some better ranked stocks in the same industry
James Hardie Industries plc JHX: Based in Dublin, Ireland, this company is a leading producer and distributor of high performance fiber cement as well as fiber-gypsum construction solutions. The three regions served by the company continue to gain ground in the execution of the global strategy to drive the penetration of a high value-added product mix.
James Hardie currently holds a Zacks Rank # 1 and has gained 39.4% year-to-date. Profits are expected to increase 34% in fiscal 2022 and 18.8% in fiscal 2023.
CRH plc CRH: This Zacks Rank # 2 (Purchasing) company manufactures cement, concrete products, aggregates, roofing, insulation and other building materials.
The company’s expected profit growth rate for next year is 10.4%. The stock is down 24.2% year-to-date.
ToughBuilt Industries, Inc. TBLT: Incorporated in the State of Nevada, the company designs, manufactures and distributes innovative tools and accessories to the construction industry.
ToughBuilt currently carries a Zacks Rank # 2. The stock is down 47.4% year-to-date. The company’s profits for 2022 are expected to increase 36.8%.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.