Buyback Expert Bets on United Rentals

07/01/2020 5:00 am EST

Focus: TRANSPORTATION

David Fried

Editor, The Buyback Letter

The world’s largest equipment-rental company, United Rentals Inc. (URI) has a diverse rental fleet that may be just what the doctor ordered at this time, notes David Fried, editor of The Buyback Letter.

During the pandemic and resulting slowdown, many large and established companies have been cutting costs; you can imagine that heavy-machinery users are not likely to purchase new machinery until the economy stabilizes, but they are more likely to rent it.

To the rescue comes URI, top-ranked in its industry group and with strong brand recognition, to fill the need as construction activity resumes in parts of the country and President Trump pursues a $2 trillion infrastructure bill.

URI stands to gain, as nearly 48% of its customers are nonresidential and 47% cover the industrials sector. The first quarter saw lower rental volume due to stay-at-home orders and other end-market restrictions, but earnings and revenues grew on a year-over-year basis.

“We’re in the strongest position in our history to respond to this crisis and to prepare for the recovery to come. This includes the strength of our balance sheet and cash flow, as we remain focused on disciplined capital allocation and cost management. We expect our free cash flow to remain substantially positive in 2020, even in our worst-case scenarios,” said URI’s CEO.

With a market cap of $11 billion, URI has outperformed the S&P 500 by nearly 18% over the past 12 months. In the last 12 months, management has reduced shares outstanding by 8.363%.

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