United Rentals to Report Q1 Earnings: What's in Store for the Stock?

United Rentals, Inc. URI is scheduled to report its first-quarter 2025 results on April 23, after market close.

In the last reported quarter, the company’s adjusted earnings per share (EPS) missed the Zacks Consensus Estimate by 1.5%, but revenues surpassed the same by 3.9%. Nonetheless, both metrics registered 2.9% and 9.8% improvement on a year-over-year basis, respectively.

The company’s earnings surpassed estimates in two of the trailing four quarters and missed on two occasions, the average surprise being 1.2%. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)

United Rentals, Inc. Price and EPS Surprise

United Rentals, Inc. price-eps-surprise | United Rentals, Inc. Quote

How Are Estimates Placed for URI Stock?

The Zacks Consensus Estimate for first-quarter adjusted earnings has decreased to $8.90 per share from $8.92 over the past seven days. The projected figure indicates a 2.7% decrease from the year-ago quarter’s earnings of $9.15 per share.

The consensus estimate for revenues is pegged at $3.57 billion, indicating growth of 2.6% from the prior-year quarter’s level.

Factors at Play for United Rentals’ Quarterly Results

Revenues: United Rentals is expected to register revenue growth in the first quarter of 2025. Ongoing demand from large infrastructure and industrial projects is expected to have driven growth in United Rentals’ first-quarter revenues. Large-scale projects, such as developments in data centers, semiconductor manufacturing, sports stadiums, and energy infrastructure, are expected to have acted as a tailwind for the company’s top-line performance.

Specialty rentals, which carry higher returns and are a focus area for URI’s expansion strategy, are also expected to have contributed to the company’s top line, both organically and through cold-starts, which added capacity in new markets.

While local market challenges in General Rentals (which contributed 70.7% to 2024 total revenues) and the normalization of used equipment margins present headwinds, the company’s diversified model and a strong pipeline of large projects provide confidence for continued profitable growth in the quarter.

Segment-wise, our model predicts first-quarter revenues for General Rentals to decrease 0.4% to $2.54 billion but for Specialty to increase 11.8% to $1.05 billion on a year-over-year basis.

The Equipment Rentals business — which accounted for 83.6% of fourth-quarter 2024 total revenues — is likely to have witnessed a decent demand trend across the segments on the back of increased fleet productivity and average OEC. Apart from Equipment Rentals, other revenue sources include Sales of Rental Equipment, New Equipment, Contractor Supplies and Service & Other revenues.

For the first quarter, we expect revenues from Equipment Rentals to increase 3.9% year over year to $3.04 billion. New Equipment Sales and Contractor Supplies Sales are expected to increase 35.7% and 0.9%, respectively, from the year-ago quarter. However, Sales of Rental Equipment are expected to decline 5.6% in the quarter to $361.6 million. Service & Other Revenue is expected to decline 11.7% from the year-ago period to $78.6 million.

Earnings & Margins: Despite expected revenue growth, margin pressures are likely to persist in the first quarter. This is due to the increased proportion of lower-margin revenue sources such as used equipment sales and new equipment sales. Additionally, growth in ancillary services and re-rentals, while positive for revenue, also expected to have contributed to margin pressure given their inherently lower profitability. Also, normalization of the used equipment market, and investing in growth initiatives such as expanding the specialty business, technology upgrades, and capacity building are expected to have compressed margins.
 
We expect adjusted EBITDA to grow 1.1% year over year to $1.6 billion, but adjusted EBITDA margin to decline 70 basis points (bps) to 44.8% in the first quarter from a year ago. Also, the gross margin is expected to contract 30 bps to 38.3% from a year ago.

What Our Model Indicates for URI

Our proven model does not predict an earnings beat for United Rentals this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you can see below.

Earnings ESP: URI has an Earnings ESP of -1.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #3.

Stocks Poised to Beat on Earnings

Here are some companies in the Zacks Construction sector, which, according to our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter.

PulteGroup Inc. PHM has an Earnings ESP of +0.27% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

PulteGroup reported better-than-expected earnings in all the last four quarters, the average surprise being 12.3%. PulteGroup’s earnings for the first quarter of 2025 are expected to decrease 13.9%.

MasTec, Inc. MTZ has an Earnings ESP of +0.85% and a Zacks Rank of 3.

MasTec’s earnings beat estimates in each of the last four quarters, the average surprise being 31.6%. MasTec’s earnings for the quarter to be reported are expected to increase 361.5%.

Martin Marietta Materials, Inc. MLM currently has an Earnings ESP of +4.48% and a Zacks Rank of 3.

Martin Marietta Materials’ earnings beat estimates in two of the last four quarters and missed twice, the average negative surprise being 1.7%. Martin Marietta Materials’ earnings for the quarter to be reported are expected to decrease 4.7%.

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This article originally published on Zacks Investment Research (zacks.com).

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