United Rentals is Friday's IBD Stock Of The Day as the equipment rental firm breaks out in a strong construction market..
The Connecticut-based company maintained full-year guidance in October after stronger-than-expected earnings for the third quarter.
Recent federal laws have boosted spending on public roadworks and infrastructure.
United Rentals stock continues to benefit from the $1.2 trillion infrastructure spending bill passed in November 2021 — as well as a key acquisition.
There's also market momentum. Industrial, construction and infrastructure stocks were big winners on Friday and for the week.
United Rentals Stock
Shares of United Rentals surged 5.4% to 501.86 on the stock market today.
United Rentals stock topped a 488.73 buy point from a cup-with-handle base. URI stock has been meeting resistance between the 480-490 level since March, making the breakout significant.
Much of the base has formed below the 50-day moving average, which is a negative. But URI stock is now well above the 50-day line.
United Rentals stock hit an all-time high Friday but the relative strength line is still below the March high, the MarketSmith chart shows. However, the RS line for URI stock is at a consolidation high, a positive sign when a stock is breaking out.
United Rentals has a Composite Rating of 98 out of 99. The Composite Rating combines various technical indicators into one easy-to-read score.
This industrial stock earns an RS Rating of 88 out of 99. That means it has outperformed 88% of all stocks in IBD's database over the past year for stock price performance.
The cup-with-handle base handle includes a 5% drop in massive volume on Oct. 18.
On Oct. 18, OTR Global downgraded its view on United Rentals to negative from mixed, citing checks that showed construction equipment fleet utilization declined year over year during Q3, according to The Fly.
The right side of the base began to form after a strong Q3 United Rentals earnings report on Oct. 25.
United Rentals Earnings
A superior EPS Rating of 96 out of 99 reflects a strong earnings record.
United Rentals' EPS growth ranged between 27% and 39% in the first three quarters of 2023. Sales growth was also robust, boosted by a recent acquisition, but slowed from 30% to 28% to 23% over the past three quarters.
Analysts expect full-year earnings growth of 22%, cooling to 7% in 2024.
In Q3, rental revenue increased 18% year over year. Used equipment sales more than doubled.
The former reflected "broad-based strength of demand across the company's end-markets and the impact of the Ahern Rentals acquisition," the company said.
The latter reflected normalizing volumes and the Ahern merger, which was finalized at the end of 2022.
United Rentals' end markets include general industrial, commercial construction, and residential construction.
In Q3, fleet productivity declined 2.2%. Average original equipment at cost increased 22.2%.
On Oct. 26, Baird analysts hiked their price target on United Rentals stock by two bucks to $322. But they kept an underperform rating on shares.
Year to date, URI stock is up more than 40%.
