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Business remains strong in United Rentals39 specialty divisions
Business remains strong in United Rentals' specialty divisions.

Rental Rates Better in Second Quarter, United’s Kneeland Says

Rental rates were better than anticipated in the second quarter, United Rentals CEO Michael Kneeland told an investor conference call after the company released its second quarter numbers.

“Our second quarter rates were better than anticipated,” Kneeland said. “We still expect full-year rate erosion, but we now believe it may not be as deep as 4 percent, but the more likely scenario is in the 2 percent to 3 percent range. It’s gratifying that we drove sequential rate improvements of 0.5-point or better in both May and June. In fact, May was our first sequential increase in 16 months. This comes from intense focus on rates, coupled with a deep dive into the data. We’re analyzing transactions that fall outside of our rate criteria, and we’ve had some success in turning that around.”

Although the rate boost was not dramatic, Kneeland said it was widespread and that all of the company’s regions had higher rates in May and June.

For the most part, Kneeland said, business improvement was felt in almost all of United’s regions. “Conditions remain challenging in Canada, but activity is strong in many areas of our core U.S. markets,” he said. “We believe the demand that we’re seeing goes beyond seasonality, and that shows that we’re still in an upcycle, with an added benefit with secular penetration. Regionally, customer activity is robust on both the East Coast and West Coast. The Northeast has a large number of multiyear construction projects underway. Massachusetts, for example, we’re on two casino projects and a railcar facility. Work began in the second quarter and should ramp up in the coming months.

“In our Southeast region, rental revenue was up 12 percent, led by South Carolina and Florida. These two states have increases of over 20 percent. On the West Coast, commercial activity is stable to up in nearly every market. The technology and entertainment sectors are driving the bulk of commercial activity right now, and infrastructure spending is strong. And nationally, our customer surveys show that optimism is still on the rise.”

Kneeland added that some key market indicators line up with the company’s position, such as the Architectural Billings Index which has been higher than 50 for five straight months and non-residential construction up more than 7 percent year over year through May. “Private non-res, which is our largest end-market, was up 9.2 percent and contractors are reporting sizable backlogs of project work, and in some cases it is stretching out more than a year. The bigger backlogs are with larger contractors where we have a competitive advantage.”

Kneeland added that specialty rentals continues strong for United Rentals, up 8.4 percent in the second quarter, with the Power & HVAC business up 15.7 percent and Trench Safety up 14.9 percent, almost entirely from same-store growth.

For United Rentals’ second quarter results, read: http://rermag.com/headline-news/united-rentals-revenue-remains-flat-second-quarter-net-income

TAGS: Rental News
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