United Rentals, Inc. (URI) reported third-quarter 2013 adjusted earnings of $1.63 per share, beating the Zacks Consensus Estimate of $1.58 and improving from the prior-year quarter’s earnings of $1.35 per share.
GAAP earnings (including RSC merger related costs along with restructuring and asset impairment charges) came in at $1.35 per share compared with the prior-year quarter’s earnings of 70 cents per share.
Operational Update
Total revenue improved 7% year over year to $1.311 billion in the quarter. The year-over-year rise is mainly due to growth in sales of new equipment (21%) and equipment rentals (8.3%). Revenues beat the Zacks Consensus Estimate of $1.309 billion.
Cost of sales increased 5% to $747 million in the quarter from $714 million in the year-ago quarter. Gross profit improved 12% year over year to $564 million. Consequently, gross margin expanded 160 basis points (bps) to 43% in the quarter.
Selling, general and administrative expenses went up 2% year over year to $167 million. Reported operating profit increased 52% to $337 million. Adjusted operating profit went up 16% to $397 million in the quarter. Operating margin increased 230 bps to 30.3% in the quarter.
Adjusted EBITDA in the reported quarter improved 13% to $642 million from $570 million in the year-ago quarter. Adjusted EBITDA margin was a record 49% in the quarter. Time utilization increased 100 bps year over year to 70.8%. The size of the rental fleet was $7.96 billion as of Sep 30, 2013, compared with $7.23 billion as of Dec 31, 2012. The company also realized cost synergies of $64 million in the quarter from the RSC integration.
Segmental Performance
Revenues in the General Rentals segment increased 7% over year to $1,038 million in the reported quarter. Gross profit for the segment also increased 8.5% to $445 million in the third quarter from $410 million in the year-ago quarter.
Trench Safety, Power & HVAC segment’s revenues climbed 25% to $100 million in the quarter from $80 million in the year-ago quarter. Gross profit for the segment improved 24% to $52 million in the third quarter from $42 million in the year-ago quarter.
Financial Update
Cash and cash equivalents were $125 million as of Sep 30, 2013, compared with $106 million as of Dec 31, 2012. Long-term debt stood at $6.95 billion as of Sep 30, 2013, compared with $6.68 billion as of Dec 31, 2012. Cash provided by operating activities was $237 million for the first nine months of 2013, compared with $153 million in the year-ago comparable period.
United Rentals’ board of directors approved a $500 million share repurchase program. The program is expected to be completed within 18 months.
Outlook
United Rentals reiterated its adjusted EBITDA guidance for full year in the range of $2.25 billion – $2.35 billion. The company has reaffirmed its outlook for time utilization of around 68.0%. It has also retained the outlook of cost synergies on a run-rate basis in the band of $230 million-$250 million for fiscal 2013.
Greenwich, Conn.-based United Rentals is the largest equipment rental company in the world, with an integrated network of 822 rentals. The company offers for rent about 3,200 classes of equipment with a total original cost of $7.96 billion.
United Rentals currently retains a Zacks Rank #4 (Sell). Other companies in the building and construction industry with favorable Zacks Ranks are USG Corporation (USG), Armstrong World Industries, Inc. (AWI) and Headwaters Incorporated (HW). While USG Corporation holds a Zacks Rank #1 (Strong Buy), Armstrong World and Headwaters carry a Zacks Rank #2 (Buy).
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