United Rentals 'has weathered the worst,' expects 2020 total revenue to be down at least $900 million

August 2020

United Rentals, Stamford, Conn., reintroduced its full-year guidance on July 29 and now expects total revenue in 2020 to come in between $8.05 and $8.45 billion, down between 9.6 and 13.9 percent compared to actual total revenue of $9.351 billion in 2019.

In a conference call with financial analysts on July 30, Matthew Flannery, United Rentals CEO, said the company believes it has weathered the worst of the economic impact from the coronavirus (COVID-19) pandemic.

“While the shape of the recovery remains unclear, the wholesale shutdown of the macro has started to lift. The visibility is still somewhat limited, but near-term indicators suggest that activity in the second half of 2020 may continue to track with seasonal patterns, which is something that we saw in June and July,” Flannery said during the call.

“The COVID response plan we shared with you in April is working. We can point to tangible gains from executing that plan, most notably a strong second quarter performance. More than anything, our results confirmed the flexibility and resiliency of our operating model. It’s one of the reasons we felt comfortable reintroducing full-year guidance,” he said.

For the second quarter 2020, United Rentals reported a 15.3 percent decrease in total revenue of $1.939 billion and rental revenue of $1.642 billion, reflecting a 16.2 percent decrease compared to last year primarily due to the impact of the COVID-19 pandemic.

Flannery pointed toward the positives in the results after the company reached its low point on April 9. From that date, through June 30, fleet on rent, he said, showed fairly steady improvement, rebounding by almost 14 percent.

“This translates to over $1 billion of incremental fleet on rent. The biggest takeaways from the quarter have to do with the five work streams we introduced in April — ensuring employee safety, supporting the needs of our customers, showing discipline with both our capital expenditure and our operating expenditures, and proactively managing our balance sheet,” he said, adding that United Rentals has had no branch closures or layoffs related to COVID-19.

In terms of capital expenditures in 2020, United Rentals now expects its gross spending to range between $800 to $900 million, less than half of the $2.1 billion spent last year

“It certainly has been a turbulent few months. Industrial activity has deteriorated more than construction, and that’s not surprising given the domino effect of COVID on different parts of the industrial economy. For example, as people stayed at home, the decline in demand for gasoline and jet fuel significantly impacted our petrochemical customers,” Flannery said.

“On the construction side, nonresidential is a very broad category that covers a lot of different market dynamics and some of the verticals have stayed busy throughout the pandemic like power and data center builds, and others are obviously more challenged like retail and hospitality. Big picture, we know that our end markets will recover at different speeds in different areas and fluctuations like this allow us to leverage our strengths of flexibility, diversification and scale. We have a deep fleet of fungible assets that we can shift between construction and industrial sectors and across geographies and verticals. Even in this environment, our flexibility helps to mitigate the pressure on revenue,” he said.

“We could also pivot to new opportunities that may arise from COVID. For example, the idea of repurposing large commercial properties has been floated by some construction analysts. This could create some incremental demands in the construction space,” Flannery said.

“It’s hard to imagine, but that’s about shifting to where the opportunities are and that’s always what our business model has been about. That flexibility and fungibility of our assets so that we can move them to where we need to move them to. I’m sure many customers are doing the same. Customers are going to need to find different ways to drive revenue and different ways to create value for their clients,” he said.

Flannery said that technology and safety will be even more top of mind for the company and its customers, creating future post-pandemic opportunities. He also shared feedback from a customer thanking the company for its touchless system, which created a positive rental experience.

“They pulled their truck up after everything was done digitally related to ordering the equipment and confirmations. We hooked a trailer up, had a skid steer behind it and he went off on his way. He said it was the fastest, most painless transaction he has ever had in the rental business. Necessity is the mother of invention, once again, and we’ll continue to take those learnings,” he said.

In addition, Flannery said the pandemic may have the same impact as other downturns on the future of the equipment rental industry.

“During all the downturns in my career, people that had to turn to rental when they previously weren’t looking at it as their No. 1 priority almost never go away. They realize they can rely on us, that the product will be there and that they will have the right equipment at the right time. Do we expect secular penetration on the other side of this? I think it will be broader because we have a broader offering,” he said.

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