Ahern helps United snag record Q1

United Rentals reported rental revenues for its first quarter of $2.740 billion, an increase of 26.0% year-over-year for the three months ending March 31. The increase reflects the broad-based strength of demand across the end-markets served by the company, as well as the impact of the December 2022 acquisition of Ahern Rentals. Year-over-year, fleet productivity increased 2.0% while average original equipment at cost (“OEC”) increased 25.6%. On a pro forma basis, including the pre-acquisition results of Ahern Rentals, first quarter rental revenue increased 16.6% year-over-year, supported by a 12.2% increase in average OEC and a 5.9% increase in fleet productivity.

According to United, “Key verticals saw growth across the board, led by nonres construction, industrial manufacturing and power.” The company added it saw double-digit growth in all of its operating regions, and its specialty business delivered another strong quarter with rental revenue up 24% year-on-year and strong growth across all lines of business, led by United’s mobile storage team.

Within specialty, United opened six new locations and said it is on track for around 40 cold starts this year. 

“We’re pleased with the start to 2023, as evidenced by the strength of our first quarter results across growth, profitability and returns,” said Matthew Flannery, CEO of United Rentals. “As we enter our busy season, we are encouraged by the momentum we see throughout our business and our customers’ continued optimism. Our team remains focused on leveraging all of our competitive advantages to add value to both our customers and our investors.

“Our first quarter results position us to reaffirm our full-year guidance, supported by our visibility into our customers’ pipelines. The integrations of our recent acquisitions are on track, adding valuable capacity that will help us support our customers as they execute on a wide-range of multi-year opportunities across infrastructure, industrial manufacturing, energy and power. We remain confident in our ability to leverage the growth we see ahead while ensuring we have the flexibility to adapt to all operating environments.”

Net income for the quarter increased 22.9% year-over-year to a first quarter record of $451 million, while net income margin decreased 80 basis points to 13.7%. The decrease in net income margin primarily reflects the impact of the Ahern Rentals acquisition on both rental and used equipment gross margins, and higher interest expense, partially offset by reductions in selling, general and administrative (“SG&A”) expense and non-rental depreciation and amortization as a percentage of revenue. Interest expense increased $56 million, or 59.6%, primarily due to increased average debt related to the funding of the Ahern Rentals acquisition, and higher variable debt interest rates. On a pro forma basis, including the pre-acquisition results of Ahern Rentals, first quarter net income margin increased 60 basis points year-over-year.

General rentals segment rental revenue increased 26.7% year-over-year, including the impact of the Ahern Rentals acquisition, to a first quarter record of $2.018 billion. On a pro forma basis, including the pre-acquisition results of Ahern Rentals, first quarter rental revenue for general rentals increased 14.3% year-over-year. Rental gross margin decreased by 320 basis points to 32.9%, primarily due to the impact of the Ahern Rentals acquisition.

Speaking during an investors call on April 27, Flannery said of the market, “Longer term, we remain confident in our ability to capitalize on several significant multiyear tailwinds for our industry that we view as resilient in any economic environment. First is infrastructure. It remains early, but we continue to see a ramp in spending from the federal infrastructure bill across a variety of project types, including airports, bridges and road and highway. We’re also well positioned to support our customers as they undertake projects across clean energy and advanced manufacturing funded by the Inflation Reduction Act.

“Within private construction, we continue to see strong investments across manufacturing, led by autos, semiconductors and energy and power. Combined reports indicate that these tailwinds hold the potential for over $2 trillion of project spend in the U.S. over the next decade.”