United Rentals - Aggressive Growth
February 14 2012 - 7:00PM
Zacks
United Rentals (URI) is a Zacks #1 Rank (Strong Buy) due to
recent strong earnings surprises.
Company Description
United Rentals is an equipment rental company. It offers
approximately 3,000 classes of equipment for rent to customers in
construction & industrial companies, manufacturers, utilities,
municipalities, homeowners, and government entities. The company's
fleet of rental equipment includes general construction and
industrial equipment, such as backhoes, skid-steer loaders,
forklifts, earthmoving equipment, and material handling
equipment.
Back to Back Surprises
URI has seen two large positive earnings surprises in a row. The
September 2011 quarter saw a beat of 21% and the December 2011
quarter had a beat of more than 34% ahead of the Zacks Consensus
Estimate. Those beats also translated into nice moves for the stock
with shares appreciating 14% and 11% respectively.
Prior to the last two reports, the company did hit a rough patch
when it reported three straight earnings misses. Oddly enough, only
one of those three negative reports ended up sending the stock
lower.
URI Reported Earnings
On January 26, 2012 the company reported revenue of $746 million
up from $597 million in the year ago period. In addition, earnings
per share came in at $0.81 up from $0.16 posted a year ago and
$0.21 higher than the Zacks Consensus Estimate of $0.61.
Valuations
URI trades at a discount to the industry average on many metrics
that aggressive growth investors key on. The forward PE discount is
more than 50% of the industry average of 30x, as is the price to
sales discount. The company trades at 1x sales while the industry
average is 1.5x. The metric that stands out is the 25x price to
book compared to the 1.7x - but this is clearly due to the rental
nature of the business.
The Chart
A quick look at the chart shows what two straight large positive
earnings surprises will do for a stock. A continuation of these
large scale beats will likely drive the stock higher, just what
aggressive growth stock investors want to see happen. URI is a
Zacks #1 Rank (Strong Buy).
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