On Monday, Citi updated its outlook on United Rentals (NYSE:URI), raising its price target to $860 from the previous $745 while maintaining a Buy rating on the stock. The adjustment follows the company's second-quarter results for 2024 and its updated guidance.
The firm's analyst noted that the 2024 EBITDA estimates for United Rentals remain largely unchanged as the company has maintained the midpoints of its guidance for the year. However, the estimates for 2025 and 2026 were increased slightly.
This change is attributed to the analyst's growing confidence in United Rentals' ability to outperform the rental market, particularly due to its significant involvement in mega projects, which are still in the early stages of development.
Citi's new price target is based on a 9x EV/EBITDA multiple, up from the previous 8x. The firm cites increased revenue visibility as the reason for this change. The analyst expressed optimism about the company's specialty growth segment, which is expected to drive the overall market outperformance.
United Rentals has been recognized for its substantial exposure to large-scale projects, which are anticipated to contribute to its growth trajectory. As these mega projects progress, the company is poised to benefit from the increased demand for its rental services.
The Buy rating by Citi reflects a positive stance on the stock, suggesting that the firm believes United Rentals shares will perform well in the market. With the revised price target, investors may watch for potential movements in the company's stock price in response to the updated financial outlook and market position.
In other recent news, United Rentals has seen significant developments in financial performance and digital tool adoption. The company's Q1 2024 results showed a 6% increase in total revenue to $3.5 billion and a 15% rise in adjusted earnings per share (EPS) to $9.15.
These record-breaking results led to an upward revision in full-year guidance, now expecting total revenue of $14.95 to $15.45 billion, adjusted EBITDA of $7.04 to $7.29 billion, and free cash flow of $2.05 to $2.25 billion.
In addition, United Rentals acquired Yak, a provider of temporary access roadways, further contributing to the company's optimistic outlook. Citi initiated coverage on United Rentals with a Buy rating and a price target of $745.00, citing the company's strong positioning to benefit from the projected increase in U.S. non-residential construction spending between 2024 and 2026. Similarly, JPMorgan (NYSE:JPM) initiated coverage with an Overweight rating, reinforcing positive sentiment from the financial sector.
United Rentals has also seen a significant uptake of its digital tools among customers, with over 70% of its Q1 2024 revenues generated from users engaging with its digital platforms.
These platforms, including Total Control®, the United Rentals Mobile App™, and the company's online marketplace, enhance the customer experience and simplify rental management. These are the latest developments in the company's ongoing efforts to optimize both customer and fleet mixes and maintain its leading position in the equipment rental market.
InvestingPro Insights
Following Citi's optimistic update on United Rentals, InvestingPro data echoes some of the sentiments expressed by the analyst. With a robust market cap of $49.75 billion and a P/E ratio standing at 19.92, United Rentals shows solid financial stature. The company's revenue growth remains impressive, with an 11.87% increase over the last twelve months as of Q2 2024 and a 6.16% quarterly growth in Q2 2024, indicating a consistent upward trajectory in its financial performance.
InvestingPro Tips highlight that United Rentals is a prominent player in its industry and has seen a high return over the last year, with a 70.54% one-year price total return as of the date provided. However, analysts have revised their earnings downwards for the upcoming period, and the stock is trading at a high P/E ratio relative to near-term earnings growth, which investors may want to consider when evaluating the company's future performance.
For those seeking a deeper dive into United Rentals' financials and potential investment opportunities, additional InvestingPro Tips are available. With the use of coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, granting access to a comprehensive suite of tools and insights. There are 12 more InvestingPro Tips available that can further guide investment decisions regarding United Rentals.
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