New United Rentals Price Target After 'Tariff-Resistant' Nod

In our preview alert for United Rentals' URI March quarter results, we argued the earnings from competitor Herc Holdings HRI and its guidance indicated that we would likely see a sold quarter from United. We also discussed the likelihood United would re-arm its share buyback program.

On Wednesday night we got both, and that combination and re-affirmed 2025 guidance is boosting URI shares on Thursday. They also keep us bullish as we move into the seasonally-stronger June and September quarters for construction activity, which should benefit from the matriculation of mega construction projects from initial stages to more active ones.

As we have done with other positions of late, including ServiceNow NOW earlier on Thursday, we will take a more conservative stance with our price target, lowering it to $800 from $900. We will review that target as monthly construction spending data is reported, and we collect more data points from others in and around the sector. But it’s more than enough upside to maintain our One rating on a company that is likely to see minimal disruption from tariffs. And we’re not alone in that thinking — Morgan Stanley recently upgraded its view on URI shares calling the company a “tariff-resistant top pick.”

The March Quarter

For its March quarter, United delivered total revenue of $3.72 billion, up 6.6% and nicely ahead of the $3.72 billion consensus forecast. Adjusted EPS came in at $8.86, also nicely ahead of the $8.81 consensus.

During the quarter, United repurchased $250 million in stock, completing its existing $1.5 billion program. We estimate that roughly $0.06 in the company’s March quarter EPS was due to the repurchase efforts over the last year that shrank the outstanding share count by about 2.7% year over year.

Total equipment rental in the quarter rose 7.4% year over year, with specialty equipment rental revenue climbing more than 20%, while general rental equipment rose by a more subdued 1.4%. As we consider those figures, let’s remember specialty rental benefits from its March 2024 acquisition of Yak Access. During the earnings call, management shared that the feedback it gets from the field continues to be optimistic, particularly for large projects. That reaffirms comments from Herc as well as those from Eaton ETN a few weeks back.

Reading between the lines, it seems United management will focus on growing its specialty rental business through cross-marketing efforts but potentially through other nip-and-tuck acquisitions. We can understand that strategy given the gross margin differential between specialty products (mid-40%) compared to general rental equipment (low- to mid-30%). As you know, one of our preferred strategies is to invest in companies whose business is undergoing a positive margin mix shift, and we can count United in that group.

Guidance

Management reiterated its 2025 guidance for total revenue between $15.6 to $16.1 billion and adjusted EBITDA of $7.2 billion to $7.45 billion. With 10 months of domestic construction spending data yet to be reported, as the figures for March, April and May are reported, we’ll revisit management’s guidance. We’ll also factor in what other companies serving the construction industry have to say over the coming weeks, including Eaton, which will report late next week.

On the earnings call, management discussed the re-armed $1.5 billion share repurchase authorization, sharing expectations to fully utilize it by the end of the March 2026 quarter. For this year, including the $250 million repurchased in the March 2025 quarter, management targets repurchasing $1.5 billion in stock. Simple math tells us that means a big step up in activity over the coming quarters to hit that target, and that activity will be another reason why we see EPS forecasts get lifted by Wall Street analysts.

But management also shared that it intends to return roughly $2 billion in cash to shareholders. Reading between that comment and the telegraphed buyback plan for this year suggests we could see another dividend increase in the coming quarters. And with the dividend in mind, alongside the March quarter earnings report, United declared its next quarterly dividend of $1.79 per share will be paid on May 28 to shareholders of record on May 14.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long URI, NOW and ETN.