With better results than expected in United Rentals’ first quarter, CEO Michael Kneeland told an investors’ conference call that the company’s customer optimism index in March was the highest it had seen since 2014.
“Demand is trending up in our core construction and industrial sectors, and commercial construction remained strong,” Kneeland said. “There is a nice inflection with upstream oil and gas, and the worst of the drag from Canada appears to be behind us.”
Kneeland said the company’s digital presence growing as well. “In the first quarter, we had a 15 percent sequential growth in online rental transactions and we gained over 1,100 new customers in those three months alone.”
Kneeland said United’s specialty divisions continued to outpace the rest of the company. “Trench, Power and Pump combined were up almost 17 percent in the quarter versus the prior year,” he noted. “We opened three cold starts through March, bringing our specialty network to 217 total branches in North America, with the plan to open at least 17 branches this year.
“Even with the steady expansion of our footprint, the bulk of our growth in specialty comes from same-store at higher margins in our gen rent operations. They make the strong case for continued investment in this segment. Specialty also benefits from cross-selling with our gen rent branches, specialty revenue and cross-selling to national accounts grew by almost 12 percent in the quarter, first quarter versus a year-ago and cross-selling our fleet started years ago as a way to boost returns on assets now has become one of our most valuable core competencies.”
United Rentals chief operating officer Matt Flannery said the integration of the acquisition of NES Rentals is going quickly. “We believe that speed is a key to alleviate uncertainties for the team,” Flannery said. “We've already finalized the leadership decisions and incorporated the NES managers and branches and stores into our region district network. And only nine days after close, we converted every new location over to our Rental Management System, the acquired fleet and the customer histories are visible in the system and we're already seeing the team used this data share fleet and they're also passing along leads to meet market demand. This is very encouraging so early on.
“There were a lot of commonalities across our regions fueled by demand in core projects. These include stadiums and resorts, data centers and factories as well as bridges and power plants. And the demand in the quarter was not only strong, but it was broad.
Flannery said that ROIC on rental trended up in over three quarters of the U.S. states and eight out of the 10 Canadian provinces. “That's a sign of a healthy operating environment. Regionally, we continue to see the strongest growth along the eastern seaboard and the West Coast, as well as some of the South Central states. And another strong highlight was our Pump Solutions business, which grew rental revenue by more than 20 year over year and almost all of that growth with same-store reflecting our cross-selling efforts, our gains and market share and an underlying improvement in our end markets.”
Both Kneeland and Flannery said demand appeared stronger than in recent first quarter periods and based on customer feedback, United Rentals expects solid demand to continue to play out in the year ahead. “We plan to spend about $1.5 billion of CapEx this year and given the positive market trends and our commitment to growing our specialty offerings, we feel comfortable with that number and it should match up well against the demand,” Kneeland said.
