Strength in the used equipment market is a sign of future demand and need for equipment, a good sign for the coming year, United Rentals CEO Matthew Flannery said on a conference call for investors last Thursday.
“Our fourth quarter revenue from used equipment sales was $275 million, almost 13 percent higher than prior year, and it was driven by healthy retain demand,” Flannery said. “We look at the strength of the used equipment market as a key indicator for the rental industry. And when the retail market is favorable, it tells us the contractor are projecting needs for that fleet.”
Flannery said another positive indicator was that the overall rental industry showed great discipline on the supply side in 2020. He also saw positive signs from a number of verticals.
“Looking at our operating environment, there are some encouraging signs,” he said. “The verticals we called out as most resilient on our last call are continuing to lead project activity in markets like power, healthcare, distribution, and technology. Within these verticals, we're looking at a range of jobs including data centers, hospitals, warehouses, and even power plants.
“On the other side of the ledger, petrochem continued to be soft in the fourth quarter. The good news is that we're seeing light at the end of the COVID tunnel. And we expect this sector to do better this year, led by scheduled turnaround activity in downstream and chemical processes.”
Flannery saw positive signs for a comeback in the non-residential construction market.
“Within non-res, which is our largest revenue base, a number of new projects broke ground in the fourth quarter, and others plan to start up this year,” he noted. “These include some big stadium projects that were postponed when COVID hit. And the same is true of airport construction and renovation. We see a number of these multiyear projects back on the table, and to a lesser degree, growing bridgework which generally has remained steady.”
Flannery expressed optimism that the new Biden Administration will be positive for infrastructure development.
“Infrastructure has been topical since the election,” Flannery said. “And while the details and the timing are unknown at this point, President Biden has been clear that this will be a priority for his administration. And as the economy continues to heal, United Rentals is in a strong position to benefit from any increase in end market spending, including infrastructure. We've invested for years in positioning the company for this type of scenario.”
Flannery added that United’s specialty segment continues to be a strong segment for the company and will continue to draw investment.
“Our specialty segment had another good quarter led by our power and HVAC business, which generated fourth quarter same store revenue that was higher than the prior year,” Flannery said. “It underscores the importance of our ongoing investments in specialty operations. In total, we plan to open another 30 specialty cold starts this year, which is double the number that we opened last year. And this will bring us close to 400 specialty locations by December.”
For an overview of United Rentals fourth quarter and full year results, visit: https://www.rermag.com/news-analysis/headline-news/article/21153555/united-rentals-declines-72-percent-total-revenue-101-percent-rental-in-4th-quarter
