Specialty Rental Remains Strong; Power Generation and Matting Carry Huge Growth Potential, Flannery Says

The specialty rental segment of United Rentals was the highlight of its first quarter, in which adjusted earnings-per-share grew by 15 percent to $9.15, a first quarter record for the Stamford, Conn.-based rental giant. CEO Matthew Flannery talked about the significance of the specialty growth and the company’s acquisition of Yak Mats during its first quarter conference call with investors last week.

“We continue to see growth across both our gen rent and specialty businesses,” Flannery said. “And within specialty, we delivered double-digit growth across all lines of business. By vertical, we saw growth across both construction, led by non-res, and our industrial end markets with particular strength in manufacturing, utilities and downstream. And we continue to see numerous new projects across many of the same areas we’ve discussed the last several quarters, including power generation, data centers, automotive, and infrastructure."

Flannery discussed the potential for further growth in the power generation segment. “This is something that we’ve been building as far back as 2016. It’s now in over 10 percent of our business. This is a big segment for us. When you tap on top of that the needs for all the data centers and all the opportunities here for growth, even before we start really accelerating the transmission work that’s needed and building out the grid for all the needs as we continue to electrify, specifically in the EV space. We think this has got growth well beyond 2024 and this is one of the tailwinds that we’re focused on.”

Yak acquisition a big growth segment

The first quarter included 15 cold starts and the acquisition of Yak Mats for $1.1 billion. Yak has a fleet of approximately 600,000 hardwood, softwood and composite mats providing surface protection in construction and maintenance, repair and operations applications.

In relation to the Yak acquisition, Flannery explained: “This acquisition is a textbook example of our M&A strategy at work. Through Yak, we’ve added more capabilities for our one-stop shop platform, enabling us to be even more responsive to our customers while also generating attractive returns for our shareholders. Yak provides temporary access roadways and surface protection to any site with uneven or soft surfaces where you need to safely move and operate heavy equipment. And similar to our purchase of General Finance in 2021, Yak is a leader in its market, yet still has plenty of room for growth as we bring this capability into our network. Since we’ve closed the deal we have spent a lot of time with their team, and we’re even more excited with the potential here.

“We really like the returns on this business. We think we can double the size of this business in the next five years.”

Flannery explained more about the philosophy of acquisitions such as Yak and General Finance.

“We view anything that’s temporary on a project or on a plan as a potential for us. So anything that doesn’t stay with the fixed plant is by definition an opportunity for us to serve the customer. Even expanding our product line in an existing business, whether it be more power in HVAC or chillers or spot coolers in that business, or some of the flooring additions to our gen rent business or the pickup trucks that we put into our business. We also expand the offering to whatever the customer needs. And that’s really our focus on this towards this one-stop shop value prop that we offer is to continue and expand those problems that we can solve for our customers.”

Rescue in Baltimore

Flannery added that United is playing a major role in recovery efforts after the Key Bridge collapse in Baltimore. 

“We were all hands on deck, helping with the immediate urgency response and the ongoing work,” he noted. “This support included a broad range of assets including mobile storage, power, light towers, portable sanitation and fencing, as well as both our aerial and dirt equipment. And what’s more, through the acquisition of Yak, which had just been completed, we’re also able to provide the mats needed at the site for the operations. This is a perfect example of our differentiated business model, where we provide unmatched support through our one-stop shop offering to our customers and ensure they can safely and efficiently focus on their own operations.” 

“We raised our full-year guidance to include the acquisition of Yak, which is expected to contribute approximately $300 million in total revenue and $140 million of adjusted EBITDA in 2024,” added William Ted Grace, United Rentals’ chief financial officer. “We’ve raised our guidance for total revenue to a range of $14.95 to $15.45 billion, implying full-year growth of just over 6 percent at midpoint.”

For a more in-depth look at United Rentals' first quarter results, visit: https://www.rermag.com/news-analysis/headline-news/article/55020813/united-rentals-revenue-increase-drops-to-single-digits-while-specialty-jumps-19-percent.