United Rentals

#1 commercial and construction equipment renter in the world.

1,000 locations in the US and Canada, 3,400 equipment items — from general to heavy construction and industrial equipment to handtools, special-event items (such as aerial towers), power (diesel generators) and HVAC equipment, and trenchsafety equipment.

90% = US sales

Operations
two business segments:

General Rental (85%)

rents out construction, aerial and industrial equipment, general
tools and light equipment, and related services and activities.

Trench, Power, and Pump (15%) .

rents out specialty construction products & offers trench safety equipment such as trench shields, and construction lasers; Power and HVAC equipment like generators, and pumping equipment for use in the energy and petrochemical industries..

Sales and Marketing
United Rentals’ customers include construction and industrial companies, manufacturers, utilities, municipalities, and homeowners.

The Trench, Power, and Pump segments serves primarily construction companies active in infrastructure projects, municipalities, and industrial companies.

sales staff at the company’s branches and customer care centers; account managers dedicated to large customer accounts; its E-Rentals portal (online e-commerce site); and advertising (trade publications, yellow pages, the internet, radio, and direct mail).

Strategy

Scale advantages due to size.
- more purchasing leverage
- a wider range of equipment and services
- more convenient movement of assets between locations
It primarily grows through acquisitions.

Mergers and Acquisitions

2018, acquired BakerCorp International ~$715 million (provider of
tank, pump, filtration and trench shoring rental solutions)… to enhance United Rentals’ fluid storage and transfer and treatment solutions.
end 2018, $2.1 billion deal acquire BlueLine Rental (equipment rental company)
2017 acquired Neff, provider of earthmoving and material handling
equipment ~$1.3 billion. boosts United’s earthmoving capabilities and adds to EOS.
mid-2017, acquired NES Rentals, (aerial rental equipment) ~$965m. The deal will position it deeper in strategically important markets – East Coast, Gulf States, and the Midwest.

READ: Reflections

this is a cyclical business. what made the jump end FY2017?

ROIC is stable…Margins are stable but cyclical…What made the ROE jump in 2017 Jan?

Int Coverage for 2018 at 4.05. only one entry dk why

one of the lowest points in EV/EBITDA or PE now.

EV/EBITDA: 7x (2018 – extremely stably fair val?)

MCV2 + R

MOAT

URI is the leader in this space and is not easy for other companies to enter this business. excellent moat.
Revenue rose by almost 23% due to acquisitions. Once adjusted, the company still saw a 7.2% rise in revenue which is evidence enough that there is no weakness in its business.
The company continues to benefit from the further adoption of equipment rental over owning.

MANAGEMENT

the company is very well managed

COMPETITION

CATALYSTS

strong companies in cyclical industries with no Chinese exposure, from those that aren’t. I wouldn’t necessarily be buying Caterpillar these days, but lumping URI in with companies much more dependent on the rest of the world makes no sense to me at all.
infrastructure is crumbling and that is where URI is making money.

RISKS

slower economic growth is hitting construction spending
company’s largest tailwind (nonresidential construction) is about to enter contraction
massive debt load relative to its size and could be pressured by rising rates
- As we can see it is all fixed rate debt, however in the coming years a lot of it is due. The company can renew its credit facilities of course enabling it to be extend out the due date on them.
none of the acquisitions are being made with cash on hand but rather the issuance of senior notes or use of credit lines. However, many times it has been seen that companies make too many acquisitions right before the end of a cycle. When the cycle ends the company is unable to refinance debt in an affordable manner, cash flows goes down making it even harder to be approved for better rates due to credit rating drops. At the rate in which United Rentals is growing its debt pile it could become an issue very soon. Currently, current ratio of less than 1.The amount of debt due between 2024 and 2028 could put significant pressure on the company if not reduced before hand.
The company is highly tied to many industries seeing pressure. Currently oil has been rapidly declining in price. This has led to under performance in shares before. The pulp and paper industry is starting to see pressure from a huge increase in supply as well. Additionally, the company doesn’t give its exposure to home building, but peak housing starts might limit upside. On a macro scale, Auto sectors, recession….will impact URI
added the highly commodity price dependent fluid solutions segment. This is now a rather large piece of the business and can be affected by a swing in consumption, pricing, and demand for oil.