Please ensure Javascript is enabled for purposes of website accessibility

Why United Rentals, Inc. Shares Plunged 17% Today

By Travis Hoium - Jan 28, 2016 at 12:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A poor earnings report has investors selling United Rentals, Inc. today.

What: Shares of United Rentals (URI -0.24%) dropped as much as 17% in early trading Thursday after reporting earnings. As of noon ET, the stock was down 15%.

So what: Fourth-quarter revenue fell 3% to $1.52 billion and net income dropped 13% to $169 million, or $1.81 per share. Revenue was only slightly below the $1.53 billion Wall Street analysts expected, but they were guessing earnings would be $2.31 per share and that's what has investors worried today.  

Management also gave 2016 guidance of $5.65 billion to $5.95 billion in revenue, where the midpoint is below 2015's revenue of $5.82 billion.

Now what: While the market may not like United Rentals' earnings trend, I can't help but see incredible value in the stock. Shares trade at just 7.7 times earnings and expected free cash flow of $900 million to $1.0 billion is attractive when compared to the $4.4 billion market cap. Management has a $1 billion share buyback program in place and that could help drive earnings per share higher. Though the business may not be in growth mode, it has a solid competitive moat and great value for investors getting in today.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

United Rentals, Inc. Stock Quote
United Rentals, Inc.
URI
$322.65 (-0.24%) $0.78

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.