URI United Rentals
Best-in-class renter riding the mega-project wave, but the price still assumes growth and margins without a cycle.
The story
United Rentals is the largest North American equipment rental company. Its moat comes from scale in fleet purchasing, route density, and a high-margin specialty segment (trench, power, fluid solutions) that keeps taking share from owned equipment and smaller rivals. It is a mature, cyclical compounder. The mega-project pipeline (data centers, reshoring, infrastructure) extends growth, but margins have slipped from 27.9% to 25.2% and fleet capex stays heavy.
Year-one growth stays at 7% because guidance was raised and the large-project pipeline is accelerating. The margin target rises slightly to 24.5%, a little below today's 25.2%, since pricing is holding while the mix shifts toward lower-margin mega-projects. Sales-to-capital (0.71 to 0.80) and beta (1.3 to 1.2) move modestly: specialty growth is less capital-intensive, used-equipment sales recover capital, and the prior beta was well above the ~1.05 industry anchor. Both changes are under 20% and partly narrow the gap with a heavily covered market price.
Value drivers
| Revenue growth (Y1) | 7.0% |
| Terminal growth | 2.8% |
| Forecast horizon | 8y |
| Target operating margin | 24.5% |
| Years to target margin | 5 |
| Sales-to-capital | 0.80 |
| Beta | 1.20 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 9.5% |
| Terminal WACC | 8.8% |
Valuation bridge
| PV of explicit FCFF | 14.33B |
| PV of terminal value | 29.91B |
| Equity value | 29.86B |
| ÷ shares → per share | $479.70 |
News
neutral -0.10 · 8 articles
- United Rentals (URI) Lifted Guidance On Stronger Demand, Is It Still Below Fair Value?
- Is United Rentals (URI) Fully Priced After Its Strong Q2 Results?
- United Rentals Sees Large-Project Pipeline Accelerate as Specialty Demand Stays Strong
- 5 Building Product Stocks to Buy on Infrastructure & Data Center Boom
- UBS Delivers Bullish Call on 10 Stocks With Up to 62% Upside
- 2 Reasons to Watch URI and 1 to Stay Cautious
- United Rentals Stock Drops 15% in a Month: Time to Buy the Dip?
- Meta upgraded, Nvidia initiated: Wall Street's top analyst calls
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 18.01B | 7.0% | 25.0% | 3.37B | 1.47B | 1.89B | 1.73B |
| 2 | 19.16B | 6.4% | 24.9% | 3.56B | 1.44B | 2.12B | 1.77B |
| 3 | 20.27B | 5.8% | 24.8% | 3.75B | 1.39B | 2.36B | 1.80B |
| 4 | 21.33B | 5.2% | 24.6% | 3.93B | 1.32B | 2.61B | 1.81B |
| 5 | 22.31B | 4.6% | 24.5% | 4.08B | 1.23B | 2.86B | 1.81B |
| 6 | 23.20B | 4.0% | 24.5% | 4.25B | 1.12B | 3.13B | 1.82B |
| 7 | 23.99B | 3.4% | 24.5% | 4.39B | 986.09M | 3.41B | 1.80B |
| 8 | 24.66B | 2.8% | 24.5% | 4.51B | 839.68M | 3.67B | 1.78B |
Key risks
- Non-residential construction downturn reverses rental rates and time utilization
- Continued margin erosion from mix, fleet inflation and competitive pricing
- About $13.8B of net debt amplifies equity losses in a cyclical trough
Catalysts
- Data center, semiconductor fab and infrastructure mega-projects converting to rental revenue
- Specialty segment share gains and buybacks funded by strong free cash flow once capex normalizes