In a survey by UBC Securities LLC, United Rentals branch managers assert rental rates improved in May compared with April, but warned that the rate of growth is likely to slow later this year. The managers also said that overall better business conditions prevailed in May 2006 compared with the same month in 2005. They also asserted that used pricing was generally strengthening in material-handling equipment, earthmoving equipment and compaction machines, but was generally weakening in aerial equipment.
The survey was compiled based on about 120 responses on the part of United Rentals branch managers. A majority of 57 percent said that business conditions were better than last year, while 19 percent indicated conditions were worse, with about 24 percent saying they were the same. The Northwest and Gulf regions polled the strongest, while the Midwest demonstrated the least strength.
About 42 percent said rental rates improved in May, versus 5 percent who said they’d decreased. About 53 percent said they stayed the same. United Rentals is targeting a 4-percent rental rate improvement for full year 2006, compared to its Q106 rate boost of 6.5 percent, and full-year 2005 increase of 6 percent. United managers commented that increased competition will lead to a slowdown in the rate of rental rate growth, although most still expected rates to continue stronger than in previous years.
About 60 percent of branch managers in the Southeast said rates improved in May, followed by 58 percent affirmative in the Northwest, 38 percent in the Gulf states, 33 percent in the Southeast, 29 percent in the Northeast, and 26 percent in the Midwest.
About half of the branch managers said used equipment prices stayed about the same over the past few months, with only 7 percent saying prices had deteriorated while the rest said they stayed steady. However, the growth in used equipment pricing, many said, was based on lengthening lead times from manufacturers on new equipment.
UBS said it is reducing its target price for United Rentals shares to $43 per share rather than $45 per share.