United Rentals, Inc.
URI
acquires the assets of family-owned Ahern Rentals, Inc. for an all-cash deal which is valued at $2 billion. This buyout has expanded the capacity for United Rentals in key geographies, with concentrations on both U.S. coasts and in the Gulf region.
Shares of United Rentals gained 1.2% on Dec 7, 2022.
Matthew Flannery, chief executive officer of United Rentals, said, “The integration is off to a strong start, giving us significantly more capacity to serve our expanded customer base. This transaction strengthens our positioning for the robust demand we expect in 2023, while also aligning with our longer-term strategy to ‘grow the core’ to drive greater shareholder value.”
Buyout Synergies
Ahern Rentals is the eighth-largest North American equipment rental company, serving approximately 44,000 customers in the construction and industrial sectors. It operates across 106 locations in 30 states and generated $310 million of adjusted EBITDA on $887 million of total revenue during the trailing 12 months that ended Sep 30, 2022.
The combined entity will enhance the fleet available to United Rentals customers by more than 60,000 rental assets with an original cost of $1.85 billion and approximately $145 million of the non-rental fleet. Again, more than 75% of Ahern Rentals’ rental fleet is comprised of high-demand aerial and material handling equipment. Notably, the company will provide its 2023 guidance in January 2023, reflecting the financial impact of the buyout.
As earlier mentioned by the company, URI will be pausing its $1.25 billion share repurchase program during the early stages of its Ahern integration and expects to realize $60 million of annual revenue synergies by three years, driven by the cross-selling of its specialty rental offerings to an expanded customer base.
Share Price Performance
URI shares have gained 5.8% year to date, outperforming the
industry
’s 23.9% decline. United Rentals is well-poised for growth, given constant growth opportunities for non-residential and industrial verticals. The company is benefiting from the U.S. administration’s increased focus on infrastructural improvement. Even its new upbeat 2022 guidance exhibits broad-based growth across its verticals, with continuous growth opportunities for datacenters, distribution centers and renewables as well as the automotive and ship plants projects.
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The company’s third-quarter 2022 earnings and revenues grew 40.9% and 17.5% year over year, respectively. The results were driven by higher rental revenues (up 20%), fleet productivity (up 8.9%) and absorptions, mainly attributable to the broad-based recovery of activity across end markets served by the company.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates. Over the said time frame, the Zacks Consensus Estimate for 2023 has increased to $36.57 from $35.27 per share. The estimated figure indicates 12.5% year-over-year growth.
Zacks Rank & Other Key Picks
United Rentals currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Other top-ranked stocks, which warrant a look in the Construction sector, include
EMCOR Group, Inc.
EME
,
Sterling Infrastructure, Inc.
STRL
and
Altair Engineering Inc.
ALTR
.
EMCOR — carrying a Zacks Rank #2 — is one of the leading providers of mechanical and electrical construction, industrial and energy infrastructure, as well as building services for a diverse range of businesses.
EME’s expected earnings growth rate for 2023 is 17%. The Zacks Consensus Estimate for 2023 earnings has improved to $9.10 from $9.07 over the past 30 days.
Sterling Infrastructure — carrying a Zacks Rank #2 — provides transportation, e-infrastructure, and building solutions.
STRL’s expected earnings growth rate for 2023 is 6.3%. The Zacks Consensus Estimate for 2023 earnings has improved to $3.37 from $3.26 over the past 60 days.
Altair Engineering — holding a Zacks Rank #2 — provides software and cloud solutions in the areas of simulation, high-performance computing, data analytics and artificial intelligence worldwide.
ALTR’s expected earnings growth rate for 2023 is 21.5%.
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