Strong Tailwinds Should Carry United Rentals and the Industry Into 2023, Flannery Expects
United Rentals sees tailwinds that should create strong business conditions going into 2023, CEO Matthew Flannery told a conference call of investors this week.
“The three tailwinds we saw at the start of the year continued to fuel our momentum,” said Flannery, discussing its strong second quarter results. “The macroenvironment remained favorable, which created more demand in the quarter and you could see that in our rental revenue growth which included fleet productivity of better than 11 percent. In addition, the customer trend toward renting equipment is alive and well. We see this as a secular shift that will continue to move the market from owning equipment to renting it over time.
“And lastly, we’re confident that our growth is outpacing our industry as we continue to take share both in our core markets and with key customers. One reason we’re gaining share is our positioning as a one-stop shop. Customers place a lot of value on being productive. And our combination of scale, job site solutions, superior service and technology is unique in our industry.”
Flannery also emphasized the company’s safety record, keeping its recordable rate below one. He also mentioned sustainability and the company’s initial agreement to purchase more than 500 all-electric trucks and vans from Ford, including F-150 Lightning pickups.
United Rentals’ optimism, however, can also be attributed to forces in the overall economic picture.
“We have strong visibility through the balance of the year, and the activity we’re seeing will create a lot of demand to get equipment on rent,” Flannery said. “There are plenty of positive signs to support this view. Virtually all of the external indicators are favorable, including the Dodge Momentum Index, the ABI, contractor backlogs and customer sentiment. And the used equipment market remains robust.”
Flannery noted that United’s general rental and specialty segments performed extremely well in the second quarter. All of the company’s regions delivered double-digit rental-revenue growth.
“Looking at it by end market, our rental revenue from non-res construction was up 27 percent year over year, and infrastructure was up 15 percent. In terms of project types, large data centers are continuing to break ground along with infrastructure projects and distribution centers, and manufacturing is coming back.”
Funding finalizing in Washington
“The power vertical is also accelerating and there are more tailwinds in the wings. With infrastructure for example, the funding is now finalized in Washington, and we expect to start seeing a benefit in 2023 and beyond. With manufacturing, the resurgence of the industrial sector in North America is being driven in part by supply chain challenges in other parts of the world and that’s good for us. It’s already evident in certain sectors. Companies are investing hundreds of billions of dollars in mega projects in the U.S. and Canada, to build plants across a variety of verticals like semiconductors and automotive. These projects will require equipment for years to come, and they play to our competitive advantage with large customers.”
Flannery added that the specialty segment continued to grow for United Rentals, led by its power and mobile storage business, with the segment growing rental revenue 39 percent, including the benefit from General Finance. “Pro forma specialty was up a strong 29 percent,” he added. “We opened 24 cold starts through June in Specialty against a revised target of about 45 openings by year end, and that’s slightly higher than our original projection of 40 openings this year.
As an example of the company’s optimism, Flannery said United expects to make the largest investment in its history in fleet, spending about $3 billion. “We’ll also continue to explore growth through cold starts and acquisitions,” he said. “We’ve made seven bolt-on acquisitions this year to date, for a total consideration of over $300 million.”
For more on United Rentals’ second quarter results, go to: https://www.rermag.com/home/article/21247564/united-rentals-rental-revenue-jumps-262-percent-in-second-quarter
