Several investment banks initiated coverage of RSC Holdings Corp. last week with high ratings.
Robert A. Baird Co.’s Michael Schneider started coverage with an “outperform” rating and a $28 per share price target.
“RSC is poised to benefit from the secular trend to rent equipment rather than buy and the continued strength of the non-residential market,” wrote Schneider.
“The equipment rental industry is growing at a 10.5 CAGR as more construction companies are choosing to rent equipment versus buy. The United States rental market is significantly underpenetrated with just 35 percent of the total equipment fleet rented versus 80 percent in the U.K. and Japan. RSC derives 69 percent of its revenue from the non-residential construction market, which is expected to grow 7 to 9 percent annually through 2011. RSC’s scale should drive higher utilization levels, lower capital spending needs, greater fleet flexibility and better customer service. RSC’s 43.9 percent EBITDA margin and 18.9 percent same-store sales growth well exceed the peer averages.
CIBC World Markets Corp. initiated coverage with a “sector outperformer” rating and a $24 price target.
Morgan Stanley’s Christina Woo initiated coverage with an “overweight” rating and a $25 price target, calling RSC a top pick, while Joel Tiss of Lehman Brothers launched coverage with an “equal weight” rating and a $25 price target.
