Shares of leading equipment rental company United Rentals (URI +0.85%) are down 14% as of noon ET on Thursday after the company reported underwhelming fourth-quarter earnings. United Rentals missed Wall Street's expectations for both sales and earnings per share, while offering guidance slightly below analysts' estimates, sparking today's sell-off. However, with the company inching sales and free cash flow (FCF) higher by 5% and 6%, respectively, in 2026, United Rentals' actual operations are doing perfectly fine, so investors shouldn't panic about today's drop.
NYSE: URI
Key Data Points
United Rental's long-term outlook still looks bright for investors
On any quarterly earnings call, it is essential to remain focused on the stock's outlook over the next three to five years (and beyond), rather than worrying too much about 90 days' worth of data. This notion rings true when looking at United Rental's slightly disappointing earnings today. While the company missed earnings, its burgeoning specialty unit continued to deliver outsize growth, with sales up 9% in Q4. Adjacent to the company's core equipment rental business, the specialty unit includes fluid, matting, and tool solutions, as well as modular spaces, trench safety, worksite services, and power and HVAC. This segment has grown by 20% annually since 2015, so it represents United Rental's growth engine. Despite the company facing broader macroeconomic challenges as it tries to rebound from a post-pandemic drop, this specialty segment shows its growth potential remains.
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Anchored by its No. 1 market share in the equipment rental industry -- and buoyed by its specialty unit's growth -- United Rental has become a FCF-generating machine that handsomely rewards shareholders. Management has lowered the stock's shares outstanding by 3.5% annually over the last decade, juicing returns for shareholders. If the stock looks "cheap" by management's standards, they're happy to buy back shares. If not, management can focus on tuck-in acquisitions as it consolidates a highly fragmented industry. In addition to buybacks, the company began paying a dividend in 2023 and recently raised its payments by 10%. Trading at just 16 times forward earnings, United Rentals is a top-tier compounder available at a fair price.
