United Rentals is the leading player in the equipment rental sector, with a market share of around 16% and sales of $15.3 billion. The company employs 27,000 people and is based in Connecticut.
Let's take a look at the company's stock market history. In 2013, the stock was quoted at $55. Last November, it was close to $900. During this period, which is a little longer than a decade, United Rentals has experienced very strong growth and become more efficient, enabling margins to improve. The reorganization of the portfolio towards specialized customers has added stability to what was previously a volatile and highly cyclical business. Between 2013 and 2024, revenues and free cash flow tripled, and the growth rate easily exceeded that of its market.
But what about now? Because we're interested in the future. We want to know whether United Rentals is capable of reproducing such breathtaking performances.
The first indication is that the market is reaching a turning point. Without wishing to speak too soon of maturity, the pace of growth is likely to slow over the next few years. This doesn't mean there's no more growth; on the contrary, demand remains strong and the order book is full. On the other hand, in a market where organic growth is in short supply, external growth operations are on the increase. It is in this sense that the acquisition of H&E Equipment Services would have made sense. A merger of these two companies would have been difficult to compete with, as in several states, United Rentals and H&EES have a large dominant exposure.
The general weakness of the market also explains the Q4 results, which left investors rather skeptical. United Rentals' growth is below the market or just at the level in terms of sales and cash flow. It is also below its own track record of recent years. This year, operating profit will continue to grow. However, to achieve this, United Rentals is going to have to spend more and get less profit in return.
Some might think, and rightly so, that market consolidation will enhance United Rentals' dominance. In reality, for the time being, it would appear that the company is struggling to cover its own inflation. Rising prices - and the return to normal of used equipment after several very lucrative years - explain the difficulty in holding margins. In short, it seems that United Rentals has "earned too much" in recent years, and that a less prosperous period is about to begin.
Nonetheless, the scale of United Rentals should enable it to achieve economies of scale over its competitors. However, given the current market configuration, it seems essential for the company to make acquisitions to keep pace with a slowing market and, above all, to find new sources of growth.
