It’s been a mediocre week for United Rentals, Inc. (NYSE:URI) shareholders, with the stock dropping 11% to US$136 in the week since its latest full-year results. United Rentals reported in line with analyst predictions, delivering revenues of US$9.4b and statutory earnings per share of US$15.11, suggesting the business is executing well and in line with its plan. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from United Rentals’s 13 analysts is for revenues of US$9.60b in 2020, which would reflect a reasonable 2.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to swell 15% to US$17.38. In the lead-up to this report, analysts had been modelling revenues of US$9.56b and earnings per share (EPS) of US$17.44 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of US$180, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on United Rentals, with the most bullish analyst valuing it at US$262 and the most bearish at US$130 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It’s pretty clear that analysts expect United Rentals’s revenue growth will slow down substantially, with revenues next year expected to grow 2.6%, compared to a historical growth rate of 11% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 4.6% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect United Rentals to grow slower than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that United Rentals’s revenues are expected to perform worse than the wider market. The consensus price target held steady at US$180, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for United Rentals going out to 2024, and you can see them free on our platform here.
You can also view our analysis of United Rentals’s balance sheet, and whether we think United Rentals is carrying too much debt, for free on our platform here.
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