Why We're Sticking With Our Price Target for This Holding

Following up on our initial comments for United Rentals' URI September quarter, the earnings call contained few surprises and confirmed our thinking that 2025 should be another solid year for the company.

Demand for the company’s rental equipment continues to benefit from non-residential construction and multiple new projects across data centers, airports, healthcare and battery manufacturing. Based on what it sees for large, complex projects, the management team’s view is we are still in the early innings.

Our take is we’re a few years into multi-year infrastructure stimulus but when we factor in the looming rebound in the housing market, we’re probably about a third of the way through if we stick to the baseball analogy. We continue to think 2026 is a potential peak year for construction activity.

Room for Margin Improvement in 2025

One issue we had with United’s quarterly performance and its outlook was the lack of operating margin improvement, despite the 7.4% revenue increase over the last nine months, not to mention the integration of its Yak acquisition.

During the earnings call, management discussed this very topic, sharing that it is making additional investments in technology, including some “AI stuff” and telematics, to drive continued fleet utilization and productivity. This makes sense to us, especially because revenue growth has been outpacing fleet growth. As those investments ramp down and the benefits are had, we should see some nice margin improvement dropping to United’s bottom line in 2025.

That combination of continued demand revenue growth and expanding margins is a nice combination for further EPS growth next year.

What Surprised Us on United’s Earnings Call

The other earnings call revelation was that United's tightened guidance for this year includes no disruption from the recent string of hurricanes. Honestly, that is a bit surprising, but it also goes to show the size and scope of the company’s business across all of North America and the demand tailwinds it is seeing. Management did share that it could see some benefit in 2025 depending on the rebuilding activity.

Thoughts on Our Price Target

We are likely to see folks across the board boost their price target on URI shares on Thursday afternoon and Friday.

We can comfortably say that because the current consensus price target is around $735 and today’s earnings call gives no reason for anything else. Because our URI price target is already set at $875, we’re going to wait until we have at least the September Construction Spending report in hand before we make any adjustments.

We’ll also be interested in North American construction activity comments from Caterpillar CAT, Terex TEX and others next week.

More Pro Portfolio

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