Strong Second Quarter Demand Will Continue All Year, Flannery Says
United Rentals continues to see second quarter growth across general rental and specialty businesses.
“Specialty saw exceptional rental revenue growth of 25 percent year over year, including 11 cold starts and with growth across all lines of businesses,” said Matthew Flannery on a conference call with investors. “By vertical, the trends of the first quarter carried into the second, namely construction posted strong growth led by nonresidential and infrastructure. And on the industrial side, power continues to post double-digit growth, while metals and minerals also grew at a healthy rate. As you know, critical to our strategy is diversified exposure across end markets. In the quarter, we saw projects kick off in a variety of end markets, including hospitals, airports and LNG terminals to name a few, while data centers continue to be a source of growth.”
Flannery also described the used equipment market as a positive trend. “We sold $624 million of OEC at a 53 percent recovery rate,” he said. “We’re on track to sell approximately $2.8 billion of fleet this year, supported by strong demand for used equipment. As we replace this fleet and grow to meet customer demand, we spent $2.9 billion, which exceeded our expectations coming into the year. The demand environment continues to support our customers’ needs while continuing to focus on capital efficiency.”
Free cash flow remained strong at nearly $1.2 billion, Flannery said. “The combination of our industry-leading profitability, capital efficiency, and the flexibility of our business model enables us to generate meaningful free cash flow through the cycle, which can then be redeployed in ways that allow us to augment shareholder value.”
Flannery said customer demand through the first half of the year has been stronger than expected and that it will continue through the second half.
“The large projects drove this demand in the first half of the year and we except that will continue through the second half,” he said. “Our increased EBITDA guidance embeds the cost actions we outlined coming into the year as we proactively look to improve our efficiency and support profitability.”
High time utilization
Flannery added that United increased its CapEx guidance as the country is running at historically high time utilization and needs additional fleet to support the stronger demand.
“We've responded to robust customer demand by investing over $2.9 billion in gross rental CapEx year-to-date,” said executive vice president and chief operating officer William Grace. “Moving to returns and free cash flow, our return on invested capital of 11.8% remained comfortably above our weighted average cost of capital, while free cash flow has totaled roughly $1.15 billion year-to-date.”
For a fuller look at United Rentals’ second quarter results, go to: www.rermag.com/news-analysis/headline-news/article/55393035/united-rentals-rental-revenue-jumps-127-percent-in-second-quarter
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.