Equipment rental company United Rentals (NYSE:URI) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 9.8% year on year to $4.10 billion. The company expects the full year’s revenue to be around $15.85 billion, close to analysts’ estimates. Its non-GAAP profit of $11.59 per share was in line with analysts’ consensus estimates.
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United Rentals (URI) Q4 CY2024 Highlights:
- Revenue: $4.10 billion vs analyst estimates of $3.94 billion (9.8% year-on-year growth, 3.9% beat)
- Adjusted EPS: $11.59 vs analyst expectations of $11.63 (in line)
- Adjusted EBITDA: $1.9 billion vs analyst estimates of $1.88 billion (46.4% margin, 1% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $15.85 billion at the midpoint, in line with analyst expectations and implying 3.3% growth (vs 7% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $7.33 billion at the midpoint, below analyst estimates of $7.42 billion
- Operating Margin: 26.5%, down from 28.5% in the same quarter last year
- Free Cash Flow Margin: 20.7%, down from 30.8% in the same quarter last year
- Market Capitalization: $50.33 billion
Matthew Flannery, Chief Executive Officer of United Rentals, said, “In 2024, we doubled-down on being the partner of choice for our customers and I am very pleased with our team’s success. Their commitment was critical to achieving the growth we delivered across this past year, which culminated in fourth-quarter records across revenue, EBITDA and earnings. Our unique value proposition, which includes prioritizing safety and productivity for our customers, supported our 2024 results and provides the foundation of our strategy to drive sustainable long-term value for our shareholders.”
Company Overview
Owning the largest rental fleet in the world, United Rentals (NYSE:URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.
Specialty Equipment Distributors
Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, United Rentals grew its sales at a solid 10.4% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. United Rentals’s annualized revenue growth of 14.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 
This quarter, United Rentals reported year-on-year revenue growth of 9.8%, and its $4.10 billion of revenue exceeded Wall Street’s estimates by 3.9%.
Looking ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
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Operating Margin
United Rentals has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 25.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, United Rentals’s operating margin rose by 5.4 percentage points over the last five years, as its sales growth gave it immense operating leverage.
This quarter, United Rentals generated an operating profit margin of 26.5%, down 2 percentage points year on year. Since United Rentals’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
United Rentals’s EPS grew at a spectacular 17.1% compounded annual growth rate over the last five years, higher than its 10.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of United Rentals’s earnings can give us a better understanding of its performance. As we mentioned earlier, United Rentals’s operating margin declined this quarter but expanded by 5.4 percentage points over the last five years. Its share count also shrank by 12.7%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For United Rentals, its two-year annual EPS growth of 15.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q4, United Rentals reported EPS at $11.59, up from $11.26 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects United Rentals’s full-year EPS of $43.24 to grow 5.6%.
Key Takeaways from United Rentals’s Q4 Results
We were impressed by how significantly United Rentals blew past analysts’ revenue expectations this quarter. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance slightly missed. Overall, this quarter had some key positives, but the areas below expectations seem to be driving the move. The stock traded down 2.6% to $738 immediately following the results.
So should you invest in United Rentals right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
