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United Rentals Inc Stock Hold Recommendation Reiterated (URI)

NEW YORK ( TheStreet) -- United Rentals (NYSE: URI) has been reiterated by TheStreet Ratings as a hold with a ratings score of C-. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • URI's very impressive revenue growth greatly exceeded the industry average of 2.3%. Since the same quarter one year prior, revenues leaped by 67.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Trading Companies & Distributors industry. The net income increased by 61.5% when compared to the same quarter one year prior, rising from $13.00 million to $21.00 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 63.63% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The debt-to-equity ratio is very high at 4.49 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, URI has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, UNITED RENTALS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

United Rentals, Inc., through its subsidiaries, operates as an equipment rental company. It offers approximately 3,300 classes of equipment for rent to customers comprising construction and industrial companies, manufacturers, utilities, municipalities, homeowners, and government entities. United Rentals has a market cap of $5.0 billion and is part of the services sector and diversified services industry. Shares are up 15.9% year to date as of the close of trading on Friday.

You can view the full United Rentals Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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