United Rental shares rise on strong 3Q profit

NEW YORK -- Shares of United Rental Inc. soared Wednesday, after the company said its third-quarter profit rose 12 percent on strong demand for its industrial and commercial rental equipment.

THE SPARK: Late Tuesday, United Rentals reported net income of $73 million, or 70 cents per share, compared with $65 million, or 91 cents per share, in the third quarter of 2011. Excluding one-time items, the company said it posted an adjusted profit of $1.35 per share.

Revenue jumped 68.3 percent to $1.22 billion, as rental revenue surged 74 percent, to $1.05 billion.

Analysts polled by FactSet expected earnings of $1.13 per share on revenue of $1.27 billion.

The company also said it expects to post total revenue for 2012 of between $4.6 billion and $4.7 billion, well above analyst estimates of $4.25 billion.

THE BIG PICTURE: Greenwich, Conn.-based United Rentals, with more than 800 locations in the U.S. and Canada, calls itself the largest equipment rental company in the world. Like other rental equipment companies, it has been hit hard in recent years by the downturn in the construction industry. The start of a construction recovery and a recent trend toward renting, rather than owning, equipment appear to have boosted United Rentals' prospects.

In April the company completed its acquisition of rival RSC Holdings Inc. in a deal worth about $2.53 billion. That significantly increased United Rentals' share of the rental equipment market, giving it a greater presence in industrial, maintenance and nonresidential construction markets. The company previously focused on construction and industrial customers, utilities, municipalities and home owners.

THE ANALYSIS: Citi analyst Timothy Thein backed his "Buy" rating for United Rentals, saying that he's encouraged by the company's expectations of strong rental rates and increased cost savings related to its acquisition of RSC, which could result in better-than-expected 2013 results.

In addition, improving nonresidential construction and industrial spending patterns, coupled with continued uncertainty prompting heavy equipment users to rent rather than buy, bode well for the company and its stock, he said.

THE SHARES: Up $5.03, or 15 percent, to $38.99 in afternoon trading, after peaking at $39.08 earlier in the day. Over the past 52 weeks, the company's shares have traded between $19.76 and $47.98.