Customers in All Segments are Busy and Optimistic as Economy Ramps Up, United Rentals’ Flannery Says

More than 60 percent of United Rentals' customers expect to grow their businesses during the next 12 months according to a survey of its customers at the end of June, while only 3 percent expect to decline, CEO Matt Flannery told a conference call with investors after releasing its second quarter results. Those expectations are in line with the positive results the company showed for the second quarter and its increased guidance regarding revenue as well as expected capex for growth.

“Customer optimism is a great barometer and the trend that we see in the field supports their view,” Flannery said. “2021 is a pivotal year for us. It confirms our return to growth, including our 19-percent rental revenue growth in the second quarter. I’ll point to some of the drivers of that growth, starting with geography. The rebound in our end markets continues to be broadly positive with all geographic regions reporting year-over-year growth in rental revenue.

“Our Specialty segment generated another strong performance, with rental revenue topping 25 percent year over year, including same store growth of over 19 percent. And, importantly, we grew each major line of business by double digits, which underscores the broadness of the demand. For years now our investment in building out our specialty network has been a key to our strategic positioning. These services differentiate our offering to customers and add resilience to our results throughout cycles.”

Flannery said the same is true for cold starts as well as acquisitions. “This year, we’ve opened 19 new specialty branches in the first six months, which puts us well on our way to our goal of 30 by year end. We’re also investing in growth in our General Rentals segment, where the big drivers are non-res construction and plant maintenance. Both areas are continuing to gain traction. And most of our end markets are trending up.”

Flannery said verticals like chemical process, food and beverage, metals and mining, and healthcare are all showing solid growth. “And while the energy sector remains a laggard, it was up year over year for the first time in eight quarters,” Flannery noted. “We also have customers in verticals that are less mainstream like entertainment, where demand for our equipment on movie sets and events more than doubled in the quarter. And while it’s a relatively small part of the revenue, it’s a good sign to see it come back.”

Flannery also noted solid activity in heavy manufacturing, corporate campuses, schools and transmission lines. “And this quarter, we’re also seeing project starts in power, transit and technology,” said Flannery. “These jobsites are using our GenRent equipment, and our trench and power solutions. And fluid solutions have seen a rebound and chemical processing and sewer bypass work as well as mining. These are just a few of the favorable dynamics in a very promising upcycle. And I want to put that in context. 2020 was about the temporary loss of market opportunity, particularly in the second quarter. Now the pendulum is swinging back.”

Flannery also talked about the possible benefits of infrastructure legislation. “We started focusing on this and preparing for this all the way back from the NES acquisition, where that added some engaging fleet experience that that team brought with it and product they brought with it, which could be played into infrastructure.  I’d say 80 percent of the fleet that we would use to support infrastructure is core fleet. So we have very fluid fleet and very fungible fleet to support this vertical. On the boundaries we would certainly, as things started to move, buy some more attenuated trucks, some message boards, some infrastructure specifically. We feel we’re really well positioned, not just talent-wise, not just knowledge-wise, but also relationship-wise. We deal with these large customers, these large civil contractors.”

Flannery added that United raised its gross capex guidance by $300 million, a good portion of which reflects large aerial fleet it’s purchasing from Acme Lift. Flannery added that while United does re-rents once in a while, the company feels the machines fit into the profile of its customers and the projects United serves.

For more on United Rentals’ second quarter numbers, go to: https://www.rermag.com/news-analysis/headline-news/article/21170960/united-rentals-second-quarter-rental-revenue-jumps-188-percent