NEW YORK (TheStreet) -- United Rentals (URI) shares are down by 9.30% to $94.78 in afternoon trading on Thursday, after the CEO of the equipment rental company suggested that May revenue would be a "little softer" than the company had previously expected.
CEO Michael Kneeland made the comments earlier today at the KeyBanc Capital Markets 2015 Industrial, Automotive and Transportation Conference.
Insight from TheStreet's Research Team:
Bryan Ashenberg of Real Money Pro and Growth Seeker spoke on the comments made by Kneeland at the conference today. Ashenberg stated that while Growth Seeker is not lowering its position in the company it is lowering its rating to 'Two' from 'One'. Here is what Ashenberg said:
Management made cautious comments on business in May and given those comments, we believe we have to be prudent and pull the stock off our One-rated list. That said, we believe management is top notch and can manage the costs side of the business to help alleviate some of the pain while the non-residential construction market re-gathers strength for the next move higher, which would re-energize United Rentals' business and its stock. Shares were recently down by nearly 10% on the comments.
When asked about utilization rates so far in May, CFO William Plummer answered: "It's fair to say that May is coming in a little softer than we had in mind at that point [on the last quarter earnings call] and that's certainly something that we're focused on to try to understand what might be driving that. ..."
Our bottom line: the business looks like it had a setback and we may be back to where we were just a quarter ago. We remain long-term bulls on the re-emerging strength in the non-residential construction market, and we will hold onto our shares despite current price volatility.
Separately, TheStreet Ratings team rates UNITED RENTALS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate UNITED RENTALS INC (URI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- URI's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 11.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- UNITED RENTALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNITED RENTALS INC increased its bottom line by earning $5.18 versus $3.63 in the prior year. This year, the market expects an improvement in earnings ($8.35 versus $5.18).
- 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 91.7% when compared to the same quarter one year prior, rising from $60.00 million to $115.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Trading Companies & Distributors industry and the overall market, UNITED RENTALS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for UNITED RENTALS INC is rather high; currently it is at 58.25%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.74% is above that of the industry average.
- You can view the full analysis from the report here: URI Ratings Report