United Rentals (URI)

Equipment rental company United Rentals (NYSE:URI) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 5.9% year on year to $4.23 billion. The company expects the full year’s revenue to be around $16.1 billion, close to analysts’ estimates. Its non-GAAP profit of $11.70 per share was 4.9% below analysts’ consensus estimates.

Company Overview

Owning the largest rental fleet in the world, United Rentals (NYSE:URI) provides equipment rental and related services to construction, industrial, and infrastructure industries.

Historically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.

Competitors in the equipment rental industry include Sunbelt Rentals (LSE:AHT), Herc Holdings (NYSE:HRI), and H&E Equipment Services (NASDAQ:HEES).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, United Rentals’s sales grew at an excellent 12.9% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. United Rentals’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 7.2% over the last two years was well below its five-year trend.

This quarter, United Rentals reported year-on-year revenue growth of 5.9%, and its $4.23 billion of revenue exceeded Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 3.7% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

United Rentals’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 40.6% gross margin over the last five years. Said differently, roughly $40.65 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

United Rentals’s gross profit margin came in at 39.4% this quarter, marking a 2.3 percentage point decrease from 41.6% in the same quarter last year. United Rentals’s full-year margin has also been trending down over the past 12 months, decreasing by 2.1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

United Rentals has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 25.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, United Rentals’s operating margin rose by 2.9 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, United Rentals generated an operating margin profit margin of 26.3%, down 1.8 percentage points year on year. Since United Rentals’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

United Rentals’s EPS grew at an astounding 18.8% compounded annual growth rate over the last five years, higher than its 12.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into United Rentals’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, United Rentals’s operating margin declined this quarter but expanded by 2.9 percentage points over the last five years. Its share count also shrank by 11.2%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For United Rentals, its two-year annual EPS growth of 4.1% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q3, United Rentals reported adjusted EPS of $11.70, down from $11.80 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects United Rentals’s full-year EPS of $42.62 to grow 10%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

United Rentals has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 14.1% over the last five years.

Taking a step back, we can see that United Rentals’s margin dropped by 5.6 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

United Rentals broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 3.8 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

United Rentals’s five-year average ROIC was 14.3%, beating other industrials companies by a wide margin. This illustrates its management team’s ability to invest in attractive growth opportunities and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, United Rentals’s ROIC has stayed the same over the last few years. Rising returns would be ideal, but this is still a noteworthy feat since they're already high.

United Rentals reported $512 million of cash and $15.21 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $7.33 billion of EBITDA over the last 12 months, we view United Rentals’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $357 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see United Rentals beat analysts’ revenue expectations this quarter. We were also glad its full-year EBITDA guidance was in line with Wall Street’s estimates. On the other hand, its EPS missed and its EBITDA fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 3.8% to $954.01 immediately after reporting.

Updated: December 4, 2025 at 10:10 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in United Rentals.

United Rentals isn’t a bad business, but we’re not clamoring to buy it here and now. To kick things off, its revenue growth was impressive over the last five years. And while United Rentals’s cash profitability fell over the last five years, its impressive operating margins show it has a highly efficient business model.

United Rentals’s P/E ratio based on the next 12 months is 17.9x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $1,020 on the company (compared to the current share price of $807.74).