After Mixed Earnings, This Holding's Call Could Reveal Key Insights
Here's what we'll be listening for today, especially about gross margin and backlog levels and pricing.
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United Rentals (URI) delivered a mixed bag of September-ending quarter results last night. The company reported adjusted earnings per share of $11.70 per share, below the $12.29 consensus figure, but total revenue rose 5.8% year-over-year to $4.23 billion, topping Wall Street’s forecast of $4.16 billion.
On the one hand, the company bested top-line expectations and lifted its 2025 revenue and earnings before interest, tax, and depreciation (EBITDA) forecasts accordingly. Revenue is now expected to be in the range of $16 billion - $16.2 billion, up from $15.8 billion -$16.1 billion previously, with EBITDA now pegged at $7.325 billion -$7.425 billion.
On the other hand, as the basic math above tells us, United missed consensus EPS expectations by around 5%. Not the biggest miss, but it's getting noticed, hence the move lower in after-market trading last night and this morning in the premarket. When we look at the income statement for the quarter, it’s obvious what led to the bottom line miss – United’s gross margin.
On this morning’s earnings call, we'll listen for the factors that led United’s September gross margin to come in at 39.3% compared to 41.2% in the year-ago quarter. We also want more on why the September 2025 quarter gross margin of 39.3% was flat with the June quarter, despite the more than 7% sequential revenue increase posted in the September quarter.
In addition, we want to hear about the company’s backlog, and its pricing and margin levels in that backlog. What we learn could tell us if the gross margin flatness seen in the June-ending and September-ending 2025 quarters is poised to continue or whether we can expect that margin to make its way back to the 40%-41% level delivered last year.
With the increasing likelihood that we see lower interest rates in 2026 and 2027, which should stimulate construction activity as project hurdle rates fall, we are inclined to remain owners of URI shares. The added tailwind of data center construction also keeps us bullish. Based on what we learn during this morning’s earnings call, we may opt to adjust our price target, and subject to where the shares land, subject to how investors interpret the call, the same comment applies to our Two rating.
United Rentals is a holding in the Pro Portfolio.
