United Rentals Inc (URI) has fallen by 8% since investors were spooked by a reported 1.4% drop in rates and overlooked a record breaking 1.90% increase in Q1 utilisation to 66%. Overall the results were a top and bottom line beat with revenue growth of 3.5% and adjusted EPS of $1.63 comparing favorably to $1.40 last year and consensus estimates of $1.55.
Michael Kneeland, chief executive officer, said that the growth was driven by strength in the core construction markets and added that positive trends in upstream oil and gas and that “the tone of conversations with our customers” were encouraging.
The company raised guidance to include the acquisition of NES Rentals earlier this month. Analysts expect EPS of $9.35 for the current year which would be a multiple of 12 times yesterday’s aftermarket price of $111.90.
With record utilization rates, top and bottom line beats and positive news regarding the economy, construction and oil and gas the current valuation looks too cheap.
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Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.