United Rentals Gears Up for Expected Second-Half Growth

July 19, 2013

United Rentals is bullish about the second half of 2013 with the company’s surveys of its customers indicating that the number of customers expecting a decline is at the lowest level in the company’s history, CEO Michael Kneeland told an investors’ conference call this week. United has already invested more than $1 billion in fleet so far in the year, chief financial officer Bill Plummer said, adding that the company might even exceed its planned $1.5 billion capex spend for the year if warranted.

United reaffirmed its 2013 outlook, anticipating adjusted EBITDA in the range of $2.25 billion to $2.35 billion on total revenue of $4.9 billion to $5.1 billion. United Rentals added 93 sales people in the first half towards its goal of 120 to 150 additional sales people, “a pretty good indication of the confidence that we have in our end markets,” Kneeland said.

Kneeland added that the sales force is doing a good job in opening new accounts. “Our year-to-date rental revenue from new accounts through June was approximately $66 million,” Kneeland said. “That’s a healthy return in the short term, but has a much larger implication for long-term growth. We also have aggressive programs in place to reactivate dormant accounts and recapture revenue that was lost during the integration and branch consolidations. We’re ramping up our approach on both efforts and we’ve already generated $38 million of rental revenue this year.”

Kneeland added the company plans to expand its specialty rental footprint by 18 locations this year. “Four of these branches are already up and running, and the rest will open in the third and fourth quarters,” he said. “Five are in the trench safety and 13 in power and HVAC.”

United Rentals’ specialty segment had rental revenue growth of more than 20 percent in the second quarter, Kneeland said, with gross margin of 47 percent. United’s “key account” business grew by more than 6 percent and outperformed rental revenue overall. “These accounts contributed $1.2 billion in the first six months of this year, and more than 70 percent of that came from national accounts.”

Kneeland said 11 of United’s 14 regions posted year-over-year increases in rental revenue in the second quarter, with the Southeast and Western Canada being especially strong. Western Canada is tied to the oil and gas sector, and the Southeast is benefitting from a rebound in the macro economy in residential, particularly in Florida, he noted.

Total revenue for the first six months of 2013 for United Rentals was $2.306 billion, compared with $2.196 billion for the first six months of 2012 on a pro-forma basis, a 5-percent hike, while rental revenue for the first six months was $1.925 billion, compared to $1.833 billion in 2012, also a 5-percent increase. Pro-forma calculations include the combined totals of United Rentals and RSC Rentals before and after United’s acquisition of RSC became finalized.

Rental revenue increased 4.7 percent for United Rentals in the second quarter on a pro-forma basis, including the total of United Rentals and RSC Rentals for the entire second quarter of 2012. Adjusted EBITDA was $549 million for the quarter and adjusted EBITDA margin was 45.5 percent, an increase of $76 million and 370 basis points compared to the same period a year ago.

Based in Stamford, Conn., United Rentals, with 820 locations in the United States and Canada, is No. 1 on the RER 100.