Locking in Massive Gains Ahead of This Position’s Earnings
The medium to longer-term fundamentals remain bright, but Hurricane Beryl may give rise to softer-than-expected guidance for the current quarter.
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* We are locking in some significant gains on United Rentals ahead of tonight’s June-quarter earnings release.
* The shares have had another strong run, but Hurricane Beryl could weigh on September-quarter guidance.
* Fed rate cuts should lower project hurdle rates helping infrastructure and other stimulus spending keep URI shares well positioned.
| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
URI | Sell | 47 | 743.50 | 185 | 3.0 |
After you receive this Alert, we will sell 47 shares of United Rentals URI at or near $743.50. Following the trade, URI shares will account for roughly 3.0% of the portfolio.
Over the last few days, shares of United Rentals have continued to climb, adding to their recent move that started soon after the June CPI report was published. With the shares less than 1% away from our $750 price target, we are going to make a prudent move here and lock in a slice of the position’s gains, which have now topped 150% as of last night’s closing. A gain of that magnitude makes our URI position a top-three performer for the portfolio behind Apple AAPL and Google GOOGL, and ahead of Microsoft MSFT.
Also fostering this move to lock in tremendous gains is the potential for United’s outlook for the current quarter to be impacted by Hurricane Beryl. Our thinking is Beryl may cause some project delays, but that will be offset later in the quarter and in the December one by related building efforts. While we are still in the seasonally strongest time of the year for construction activity, the forward view continues to be one at least partially driven by the Fed being incrementally closer to rate cuts than not.
Similar to our thinking on Builders FirstSource BLDR, we see rate cuts reducing hurdle rates for non-residential construction projects at a time when infrastructure stimulus dollars, along with those for other stimulus programs, including the CHIPs Act, are flowing. For that reason, and the potential for a favorable longer-term outlook to be discussed by United on its earnings call, we will continue to keep some skin in the game on URI. Based on comments for H2 2024 and perhaps even 2025, we’ll revisit our price target but we would need to see it near $875 to reconsider our Two rating or a pullback to $665-$670.
Like the analysis we provided ahead of Lockheed’s LMT earnings on Tuesday, the Wall Street consensus price target for URI shares is $681. Should United deliver a solid quarter and an upbeat outlook for H2 2024 after today’s market close today, we will likely see Wall Street price targets move higher. And because the company’s earnings call isn’t until the morning of Thursday, July 25, which will yield far more insight into the second half, we’re not expecting to see price targets move until late Thursday or possibly Friday morning.
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(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long URI, AAPL, GOOGL, MSFT, BLDR and LMT.
