United Rentals (URI)
Fundamental analysis
United Rentals is an American company founded in 1997 by Bradley Jacobs. United Rentals rents out machinery, tools and equipment. They focus on construction, industrial businesses and private customers. The company grows mainly through acquisitions of its competitors. The company’s market share in America is estimated at 16%, making United Rentals the largest company in the industry. The company operates worldwide. It has the most offices in America (1,504), 38 in Europe, 23 in Australia and 19 in New Zealand. It employs approximately 26,300 people.
The company managed to be in the positive numbers even during COVID. Net profit was as follows:
- 2019 – USD 1,174 million
- 2020 – USD 890 million
- 2021 – USD 1 386 million
- 2022 – USD 2,105 million
- 2023 – USD 2,424 million
The U.S. services PMI for January 2024 is 53.4%, and the industry PMI is 49.1%. Both figures indicate an expansion of the US economy.
Results
In 4Q2023, the company achieved its best quarterly results ever. Sales rose to $3.728 billion, net income reached $679 million.
For the full year 2023, the company returned a total of USD 1.406 billion to investors. It repurchased $1 billion worth of stock (helping to drive the price up) and paid out $406 million in dividends. The dividend per share reached $1.63 in 2024 per quarter. In 2023, it was $1.48 per share per quarter (total for the year of $5.92 per share)
Technical analysis
According to the moving averages, the company has been in an uptrend since November 2022, although it had a rough patch in June 2023, when it almost crossed and created a sell signal. Now the two averages are sufficiently apart to signal a strong uptrend.
The RSI is just below the overbought zone, due to the strong rise over the last few days. Probably due to the announcement of annual results in January 2024.
The nearest support is at $585 per share, which is far enough away from the current price.
Volume is roughly 300,000 shares per day, a rather below average volume.
The beta is 1.84 which indicates a low correlation with the S&P500. However, also the stock is up 44% over the last year while the S&P500 is “only” up 23%.
Conclusion
As the saying goes, the shovel sellers made the most money on the gold rush. URI leases machines to other entities that are building or creating something. The advantage of this business is the reduction of risk in the form of selling the final product. United Rentals doesn’t care at all if a house built with their machines is sold at a higher margin or a lower margin. They make a profit on the rental.
United Rentals, with a price over $600, is one of the more expensive stocks. It can’t quite be expected to double its price quickly like other cheaper stocks. On the other hand, business is booming, the company is returning capital to investors through a dividend and share buybacks, so this may be an interesting option for longer-term investors.
Sources
https://seekingalpha.com/symbol/URI
https://investor-relations.unitedrentals.com/events-and-presentations/event-details/2024/Fourth-Quarter-and-Full-Year-2023-Earnings-2024-c4WdfqBh20/default.aspx
https://s21.q4cdn.com/336331232/files/doc_news/2024/United-Rentals-Announces-Record-Fourth-Quarter-and-Full-Year1-2023Results-Introduces-2024-Outlook-and-Enhanced-Capital-Allocation-Str-HSIFT.pdf
https://finance.yahoo.com/quote/URI?p=URI
https://en.wikipedia.org/wiki/United_Rentals
https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/january/
https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/january/