Bernstein analyst Chad Dillard upgraded the rating on United Rentals (URI – Research Report) to a Hold today, setting a price target of $666.00.
Chad Dillard has given his Hold rating due to a combination of factors influencing United Rentals’ current and future performance. One of the primary reasons is the significant role that the Specialty rental segment is playing in driving growth. This segment has shown impressive growth, doubling the rate of the General Rental segment, and now contributes substantially to the company’s revenue and profit margins. However, while Specialty rental is a promising growth engine, the General Rental segment still represents a significant portion of profits and faces challenges, especially with the anticipated flattening of non-residential construction spending in 2025.
Despite the positive outlook for Specialty rental, the overall market conditions present a mixed picture. The next 12 months are expected to be volatile, with pressures on the General Rental segment due to a softer supply and demand environment, which could impact margins. Although the long-term growth prospects are solid, with an expected EBITDA growth at an 8% CAGR through 2028, the current valuation suggests a balanced risk/reward scenario. Therefore, the Hold rating reflects the potential for growth tempered by near-term uncertainties and pressures in the broader market.
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