Despite uncertainty in the industry over such issues as interest rates, tariffs and a fluctuating stock market, United Rentals CEO Michael Kneeland told an investors’ conference call this week that the company expects another solid year of growth ahead, including continuing start-ups in the company’s specialty area.
“We have the industry’s biggest ear to the ground,” Kneeland said. “From everything we’re seeing and hearing, there is no discernible impact on our business. All signs indicate another solid year of growth. In addition, we have a long history of outperforming both the equipment rental industry and the construction marketplace.
"We did that again in 2018 when the U.S. rental industry was widely expected to report expansion in the mid-single digits. By contrast, our revenue grew by almost 11 percent on a pro forma basis. And importantly, we have a robust capital structure that gives us significant flexibility in navigating any market conditions.”
Kneeland said the company remains focused on balancing growth, margins and returns and free cash flow, ensuring the company operates with this goal.
“This includes aligning the acquisitions we’ve integrated over the past two years and we bought quality operations with great teams who can thrive in our ecosystem, and now we’re identifying ways to optimize the operations as part of United Rentals.
United Rentals president Matt Flannery, who will take over as CEO in the coming months, talked about the benefits the company’s recent acquisitions have brought to the company.
“In 2018, you saw us acquire BakerCorp and extend both the depth and reach of our Fluid Solutions business. We also did some smaller deals and site services, and we opened 30 additional specialty cold starts with another 27 planned for 2019. So combined our Trench, Power and Fluid Solutions businesses generated 40-percent more revenue in 2018, and importantly almost half of that came from same-store growth.
“When we build out our specialty footprint, we’re also creating cross-selling opportunities for our gen-rent business. In the fourth quarter with a record 323 specialty locations, our company-wide revenue from cross-selling grew by 27 percent. This is an example of how our connected network of locations combined with a broad fleet offering creates a major competitive advantage for us. We’re able to take fungible assets and move them from geography-to-geography or end market-to-end market to help drive returns.”
Flannery noted that the company’s recordable accident rate remained lower than 1 for the fifth consecutive year and 92 percent of the company’s branches remained injury free for the full 12 months. He added that demand from customers remains strong and optimistic.
“To give you a sense of what we’ve seen in the fourth quarter, all of our regions increased rental revenue year-over-year and all of our verticals were up as well,” Flannery added. “The oil and gas sector remains strong despite some underlying volatility, and both the U.S. and Canada are showing solid activity. Canada is out of its slump from a couple of years ago and in '18 they drove double-digit revenue growth naturally for the quarter.
“Company-wide, our revenue from non-res construction was up 11 percent in the quarter and this is important because this is our largest end market and it’s encouraging to see how broad based that demand is. We’ve beefed up our presence across many of our trade areas in the past 12 months with the acquisitions of BlueLine, Baker and WesternOne. These branch integrations will be essentially complete by the end of the first quarter and we expect the combinations to continue to drive benefits throughout the year.”
