By Sam Boughedda
Shares of United Rentals (NYSE:URI) were downgraded to Underperform from Market-Perform by a Bernstein analyst. The analyst also lowered their price target on the stock to $269 from $307, implying a 19% potential downside.
"URI's organic growth is about to turn negative in the next 12 months: on-the ground sentiment is deteriorating, construction equipment demand is showing signs of slowing, Money Supply growth, which leads URI organic revenues by four quarters points to negative organic growth in '23. In contrast, the street forecasts 7% revenue growth in '23," wrote the analyst.
The analyst added that the material cost inflation and lack of affordability are challenging economics of residential and non-residential new builds.
"The average house costs 8x the average annual income, higher than on the eve of the GFC, and non-resi construction cost growth is outstripping real-estate price growth," he explained. "Despite the headwinds, URI is up 35% in the last month, trades at a 6x EV/EBITDA when in our view it should be closer to 5x and at the current share price, it is discounting an >60 manufacturing PMI."
United Rentals shares are down 3.5% Thursday.