May. 02, 2021
Matthew Flannery, president and CEO, United Rentals, Stamford, Conn., told analysts in an April 29 call that 2021 is shaping up to be a “promising” year for the world’s largest equipment rental company.
While United Rentals reported a 6.5 percent decrease in rental revenue to $1.67 billion for the first quarter and a drop in total revenue to $2.06 billion from $2.13 billion last year, Flannery said all the signs are pointing to overall growth this year.
“Our performance says a lot about our willingness to lean into that promise, whether it is with capital expenditures, mergers and acquisitions, cold starts or other strategic investments, our balance sheet and cash flow give us the ability to keep every option on the table,” Flannery said during the call.
“Throughout last year, we made a decision to retain capacity by keeping our branch network and our team intact. Now, at the end, the economic indicators are flashing green, and our strategy is paying off by riving value for our people, our customers and our shareholders,” he said.
“We knew we had built good momentum in the fourth quarter and that the economy was moving in the right direction. But the first quarter was still uncertain as we ended the year. Well, not anymore. Both our operating conditions and our performance have improved faster than we expected. We gained back a lot of the ground on rental revenue, narrowing the decline from 2020; and importantly, we exited the quarter up year-over-year in March. Our customers are also optimistic. They are gaining more visibility and they are turning to us for the equipment they need,” Flannery said.
In addition, he said United Rentals has absorbed almost all of the excess fleet the company had in 2020 and generated almost 30 percent more in proceeds from used equipment sales in the first quarter than the company did last year.
Concerning mergers and acquisitions, Flannery pointed to the company’s most recent acquisition of Franklin Equipment, adding 20 locations to the United Rentals footprint in the central and southeast regions, as well as the nearly $1 billion acquisition of General Finance Corp. that is expected to close mid-year.
“We feel the time is right to allocate capital to attractive deals like these that meet our mergers and acquisitions criteria for a strong strategic, financial and cultural fit. General Finance is a market leader in mobile storage and modular office rentals. These services complement our current specialty and general rental offerings. We are excited about the opportunity to unlock additional growth while solving more of our customers’ needs with these new products,” he said.
“We will be entering these markets with a strong presence and established footprint and a talented team with solid customer relationships, many of them new to our company. It is a textbook example of one plus one equaling more than two,” Flannery said.
He described the current rebound in their end markets as “broadly positive” for the company’s general rental business as well as the specialty segment.
“Our specialty segment had another robust performance led by our Power and HVAC business. Rental revenue for specialty moved past the inflection point and was positive year-over-year for the full-quarter. We are continuing to invest in growing our specialty network with six cold starts year-to-date and another 24 planned this year,” Flannery said.
“Customer sentiment continues to trend up in our surveys, as a majority of our customers expect to see growth over the next 12 months. And importantly, the percent of customers who feel this way has climbed back to pre-pandemic levels. We think there are a few reasons for this. For one thing, our customers have a significant amount of work-in-hand, and they can also see that our project activity is continuing to recover. The vaccines are rolling out, restrictions are easing in most markets, and the weather is turning warmer. These are three positive dynamics converging right before a busy season,” he said.
In addition, he said customers are encouraged that infrastructure is “back on the table” in Washington, D.C., and that the administration’s current proposal for spending could have a very positive impact on United Rentals.
“Most of the infrastructure categories and the administration’s current proposal are directly in our wheelhouse — things like bridges, airports and clean energy. We will see how the process goes, but almost any infrastructure spending will benefit us in the long term both directly and indirectly,” Flannery said.
These factors contributed to the company’s decision to increase its guidance for 2021, which now calls for the company to earn $9.05 billion to $9.45 billion in total revenue this year, without including any impact from the pending acquisition of General Finance Corp.
United Rentals also increased its outlook related to capital expenditures to gross purchases of $2.2 billion to $2.4 billion with net rental capital expenditures of $1.25 billion to $1.45 billion.
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