United Rentals’ URIfirst-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate and increased from the prior-year quarter, owing to changes in tax laws and higher rental revenues.
Adjusted earnings of $2.87 per share beat the Zacks Consensus Estimate of $2.38 and surged 76% from the prior-year quarter.
Revenues
Total revenues of $1.73 billion surpassed the Zacks Consensus Estimate of $1.66 billion by 4.2%. Revenues rose 27.9% year over year.
Rental revenues were also up 25.1% from the year-ago quarter to $1.46 billion. Volume of equipment on rent increased 26.1%, while rental rates inched up 1.9%.
Margins
Total equipment rentals gross margin contracted 70 basis points (bps) year over year to 37.4%.
Adjusted EBITDA improved 32% year over year to $780 million. Adjusted EBITDA margin increased 140 bps to 45% in the quarter.
Segment Discussion
General Rentals: Segment rental revenues increased 22.9% year over year to $1.2 billion. Segment equipment rentals’ gross profit rose 18.3% to $426 million. However, gross margin declined 130 bps year over year.
Trench, Power and Pump: Segmental rental revenues increased 36.5% year over year to $258 million, primarily on a same-store basis. Equipment rentals gross profit rose 41.7% to $119 million, while gross margin improved 170 bps on a year-over-year basis.
Time Utilization & Fleet Size
Time utilization declined 80 bps to 65.2% from the year-ago quarter’s level, thanks to the impact of the NES and Neff acquisitions.
The size of the rental fleet was $11. 4 billion of original equipment cost (OEC) as of Mar 31, compared with $11.5 billion as of Dec 31, 2017. The age of the rental fleet was 47.5 months on an OEC-weighted basis as of Mar 31, compared with 47 months as of Dec 31, 2017.
Balance Sheet
United Rentals’ cash and cash equivalents totaled $278 million as of Mar 31, compared with $352 million as of Dec 31, 2017.
In the quarter under review, the company generated $642 million of net cash from operating activities compared with $622 million in the prior-year quarter.
Free cash flow was $516 million for the first three months of 2018, compared with $490 million in the year-ago period.
Share Repurchase Program
United Rentals authorized a new $1.25-billion share repurchase program which will begin when the current program is complete. As of March 31, the company had completed $832 million of repurchases under the current program, which it intends to complete by mid-2018.
Reiterated 2018 Guidance
Total revenues are expected in the range of $7.3-$7.6 billion, reflecting an increase from $6.64 billion reported in 2017.
Adjusted EBITDA is projected between $3.60 billion and $3.75 billion, higher than the prior-year adjusted EBITDA of $3.16 billion.
Net rental capital expenditures after gross purchases are projected in the range of $1.2-$1.35 billion.
Net cash provided by operating activities is expected in the range of $2.625-$2.825 billion, higher than $2.230 billion reported in 2017.
Free cash flow is expected in the range of $1.3-$1.4 billion, higher than $983 million reported in 2017.