United Rentals’ Revenue Jumps 16.8 Percent in Third Quarter
United Rentals posted $1.766 billion in third quarter revenue compared to $1.508 billion in last year’s third quarter, a 16.8-percent leap. Rental revenue was $1.536 billion compared to $1.322 billion in the year-ago quarter, a 16.2-percent jump. Third quarter net income was $199 million, compared with $187 million in last year’s frame, a 6.4-percent increase.
Adjusted EPS for the quarter was $3.25 per diluted share compared with $2.58 a year ago. Adjusted EBITDA was $879 million, and adjusted EBITDA margin was 49.8 percent, increased of $132 million and 30 basis points.
Within the rental revenue, owned equipment rental revenue jumped 15.8 percent, and the volume of equipment on rent increased 18.2 percent. Rental rates ticked up 0.1 percent.
Time utilization jumped 160 basis points year over year to 71.9 percent, a third quarter record for United, with each month in the quarter establishing a new monthly record. On a pro forma basis, time utilization soared 180 basis points year over year.
The company’s Trench, Power and Pump specialty segment increased rental revenue 32.9 percent year over year, primarily on a same-store basis. The segment’s rental gross margin jumped 280 basis points to 54.8 percent.
United Rentals generated $139 million of proceeds from used equipment sales compared to $112 million a year ago, the increase primarily coming from sales of NES equipment, which closed April 3 of this year.
United completed its previously announced acquisition of Neff Corp. for about $1.3 billion, Oct. 2, just after the close of the third quarter. The acquisition will augment United’s earthmoving capabilities and efficiencies of scale in key market areas particularly fast-growing southern geographies. The assets include about $860 million of fleet based on original equipment cost, and 69 branch facilities.
“We are very pleased with the gains we reported for the third quarter,’ said United Rentals CEO Michael Kneeland. “These include significantly higher volume and time utilization, margin growth, and strong cash flow. Importantly, we delivered positive rental rates both sequentially and year-over-year for every month in the quarter. Our U.S. end markets are driving robust demand for our fleet, and Canada is continuing to rebound. Given these many positive dynamics, and the extended hurricane recoveries, we’ve raised our 2017 gross capex plan by up to $200 million to best serve the current and anticipated needs of our customers.
"Looking at the balance of 2017, our updated guidance reflects the combination of a fundamentally strong market and the contributions from our acquisitions this year. The integration of Neff is well underway, with all locations on our operating system. We expect fourth quarter market activity to exceed normal seasonality, and based on everything we see, we have confidence in the operating environment for 2018."
For the first nine months of 2017, rental revenue hiked 11.7 percent year over year. Pro forma rental revenue increased 6.5 percent, with a 14.5-percent jump in volume of equipment on rent. Rental rates declined 0.7 percent for the nine-month period. Time utilization jumped 69.3 percent on an actual basis and 69 percent pro forma. The Trench, Power and Pump specialty segment leapt 23.6 percent year over year.
The company generated $1.766 billion of net cash provided by operating activities and $582 million of free cash flow compared with $1.630 billion and $846 million, respectively, for the same period last year. Net rental capital expenditures were $1.107 billion, compared with $784 million for the same period last year.
The company has increased its guidance, expecting $6.525 billion to $6.625 billion for the year compared to the previous outlook of $6.25 billion to $6.4 billion.
The size of the rental fleet was $10.76 billion of OEC on Sept. 30, 2017, compared with $8.99 billion Dec. 31, 2016. The age of the rental fleet was 46.3 months on an OEC-weighted basis at September 30, 2017, compared with 45.2 months at the end of Dec. 31, 2016.
Return on invested capital was 8.6 percent for the 12 months ended Sept. 30, an increase of 30 basis points from the 12 months ended Sept. 30, 2016.
Based in Stamford, Conn., United Rentals is No. 1 on the RER 100.
About the Author
Michael Roth
Editor
Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.