Photo by United Rentals
Kneeland expects continued construction growth and solid equipment rental improvement for the next few years.
Kneeland expects continued construction growth and solid equipment rental improvement for the next few years.
Kneeland expects continued construction growth and solid equipment rental improvement for the next few years.
Kneeland expects continued construction growth and solid equipment rental improvement for the next few years.
Kneeland expects continued construction growth and solid equipment rental improvement for the next few years.

Kneeland Discusses Record Utilization, Rates, NES Integration and More

July 21, 2017
United Rentals’ utilization in the second quarter was the highest second quarter in its history with each month in the quarter setting a new record, CEO Michael Kneeland told an investors’ conference call on Thursday.

United Rentals’ utilization in the second quarter was the highest second quarter in its history with each month in the quarter setting a new record, CEO Michael Kneeland told an investors’ conference call on Thursday. And even though rental rates declined on a year-over-year basis, Kneeland noted that rental rates improved sequentially each month during the quarter.

“Rates will continue to be a major area of focus for us,” said Kneeland. “Our employees understand how critical it is at this part of our strategy. We also increased time utilization to a new record of 69.4 percent. This is the highest time utilization of any second quarter in our history. In fact each month set a new record.”

Kneeland said the company’s integration of NES Rentals has occurred at a fast pace. “We’re no longer talking about standalone NES in United Rentals,” he said. “While the integration is ongoing, we are now operating as one organization. And we have made a great deal of progress on $40 million of cost synergies that we identified.”

Kneeland referred to some of the integration milestones.

“The back-office sales and operating teams are now fully integrated and the branches have moved onto our management systems,” he said. “We’re in the process of training our new employees on salesforce.com and our rate management tools. We’re rolling out right optimization technology for deliveries. We’re also installing telematics on the acquired fleet and we’re about 10 percent through the retrofit program with telematics installed on over 2,500 machines. But one of the most important parts of the integration has nothing to do with equipment. Back when we bought NES, we noted that our two companies share a strong safety culture. I’m pleased to say that last month we had the safest June on record.”

Kneeland was bullish on the company’s future prospects and the overall construction economy.

“Spending on commercial construction remains strong and the forecast of the U.S. equipment rental industry overall has continued growth over the next few years,” he noted. “Two former drags on demand have turned the corner. One is upstream oil and gas where the inflection point we saw last quarter has been sustained, and the other is Canada. Western Canada seems to have stabilized and eastern provinces are going strong. International rental revenue was up 7.3 percent in the quarter and volume was up 8.8 percent with improving rate trends. That’s the strongest growth we have seen in Canada in eight quarters.

“In the U.S., our largest revenue gains continue to come from two coasts. In New England, for example, more than $5 billion of large projects are either starting or ramping up in the third quarter following a strong spring. These range from casinos and plant expansions to office complexes. In the West we’re seeing multi-year projects for entertainment venues and large corporate campuses. And in the Southeast, it’s automotive plants, data centers, infrastructure and manufacturing.”

Another indicator of growth, Kneeland said, is the company’s customer confidence index. “In the June, the level of optimism remained strong with a maturity of our customers indicating that they expect business to improve over the next 12 months,” he said. “In our opinion, the cycle has substantial runway ahead.”

Once again, United Rentals’ Trench, Power and Pump segment was a strength, increasing 19 percent year over year “primarily on a same-store basis and gross margin improved by 250 basis points to 49.6 percent,” Kneeland said. “Our Pump Solutions business had an outstanding showing with revenue up more than 37 percent, some of which is due to the improving upstream oil and gas. And we will continue to expand our specialty network with a total of at least 17 cold starts this year, seven of those are operating now, bringing our specialty footprint out of a total of 960.