A Top Stock Well Positioned for Future Growth (URI)

This Is Prime Time for United Rentals

United Rentals (NYSE: URI) is the largest construction equipment rental company in the world. It owns 13% of the North American share for equipment rentals. In total, the company manages some 660,000 pieces of rental equipment with a total value of approximately $14.2 billion (Wikipedia.org). It employs nearly 19,000 people at 1,186 locations in the US, Canada, and even some locations in Europe.

The company was founded by Bradley Jacobs in 1997. Mr. Jacobs realized that there were many equipment rental companies around the US and clear redundance in the market. Consequently, his strategy from the start was to consolidate these rental dealers across the US.

He started with six small rental stores scattered around the country. The company went public only three months later on the New York Stock Exchange. The first big acquisition came shortly thereafter in the summer of 1998, when the company purchased U.S. Rentals Inc. for about $1.25 billion.

 

Image of United Rentals founder, Mr. Bradley Jacobs. (Source: alchetron.com)

 

Jacobs was able to start United Rentals because he already had sufficient capital from founding three previous multi-billion-dollar companies. The first two were oil brokerage firms and a large refuse collection company formerly known as United Waste Systems, Inc. The latter was sold to Wayne Huizenga’s Waste Management, Inc. for $2.5 billion in 1997.

 

Equipment Offerings

The amount and diversity of equipment offered by United Rentals is staggering and hard to fully comprehend. There are eight primary specialty fields in which it rents equipment. The first is trench safety, which includes equipment for shoring underground construction sites.

Next, it rents mobile power generation and climate controls equipment for construction sites, TV, and movie filming sites. It rents trailers stocked with tools and supplies for construction sites. Then, there’s the fluid solutions for transferring, removing, and containing liquids in mining, agriculture, and emergency zones.

In line with Jacob’s previous experience with waste management, URI offers rental of portable restrooms. If you need to communicate with colleagues on construction sites or movie sets and your smartphone isn’t enough, URI will lease you Motorola handheld radios. It also has equipment for producing movie and televised sports event sets. Finally, it rents drones that can be used to survey construction sites, or even nuclear silos.

 

Typical United Rentals store in North America. (Source: legacig.com)

 

A list of more specific equipment available from United Rentals includes arial platforms (scissor lifts, boom lifts), warehouse forklifts, reach forklifts, back hoe loaders, light towers, generators, trucks, trailers, welding equipment, industrial lawnmowers, concrete mixers, submergible pumps, etc., etc. If you go on their website, you can look up literally tens of thousands of other items. The point is, nearly any type of equipment that might be necessary to construct a building, build roads, build bridges, cap off a mine, build a dam, or lay railroad tracks, you can find it at United Rentals.

 

Growth Strategy

From the beginning, United Rentals adopted a growth by acquisition strategy, and although it has seen organic growth that didn’t involve an acquisition, since its founding, the company has acquired dozens of companies.

Some highlights include RSC Holdings (renter of construction equipment) in 2011, National Pump (pump and pumping equipment manufacturer) in 2014, all of Cummins’ mobile power generation business in 2017, Neff Corporation (renter of industrial and construction equipment) in 2017, Baker Corp (provider of tanks, pumps, and filtration equipment), and BlueLine Rental (top ten renter of construction equipment) in 2018.  Most recently, United Rentals acquired General Finance Corporation for nearly a billion dollars. General Finance is a leader in mobile office storage and mobile office solutions. This latest acquisition (Mid-April 2021) opens a new category of rentals for URI.

 

Baker Corporation, which makes fluid pumping and filtering equipment was acquired by United Rentals in 2018. (Source: wateronline.com)

 

United Rentals also realizes significant profits from selling used equipment that it previously used in its rental businesses. This is an especially important business considering that acceleration in the number of infrastructure projects means that many construction companies will be looking to procure used equipment before committing to buying new equipment.

 

Sustainability at United Rentals

One of United Rentals’ stated primary corporate goals is to reduce greenhouse gas emissions associated with its business by 35% compared to its 2018 emissions by 2030. Indeed, the company has taken many impressive steps already to achieve this goal.

Of all the power equipment for rent at URI, over 20% is offered in an electric or hybrid powertrain version. Some notable examples of this include its pickup trucks, cargo vans, and personnel transporters. Starting in May, companies can rent the new all-electric Ford Lightning F-150s as well the new E-Transit battery electric cargo vans. Moreover, many of the various forklifts, excavators, backhoes, etc. are available to rent in all electric or hybrid powertrain versions.

 

United Rentals now offers to rent its customers the new all-electric Ford F-150 Lightning. (Source: electrek.co)

 

United Rentals is even going beyond offering green vehicles. Starting this month, the company offers its customers its Total Emissions Control app. This software allows companies to estimate the amount of greenhouse gases and particulate emissions emitted by the entire fleet of powered equipment they rent, including CO2 and NOx emissions, as well as diesel particulate emissions.

As construction companies and their customers become increasingly interested in achieving carbon neutrality, the Total Emissions Control app is becoming more useful. It gives these construction companies the ability to not only track their emissions, but also be able to report to their customers if they are achieving agreed, and possibly even contractual, obligations on making building construction clean and sustainable.

A good example of this is Meta’s recent construction of new hyperscale data centers. It contracted Turner Construction to build these new facilities. By using the URI app, Turner was able to demonstrate to Meta that it had met its obligations, and therefore helped Meta achieve its goals for greenhouse gas emissions.

 

Down, But Hardly Out

Below is the stock chart for United Rentals.  As you can see, in recent months it has followed the general trends of the market.

 

 

It has seen some recent recovery and seems to have cut its losses quickly. Given the company’s strong market position and the likelihood that its markets will see growth from the recent semiconductor and climate bills with all the construction and infrastructure projects they will initiate, the stock should be back on track quickly.

It’s currently only down less than 4% while the NASDAQ 100 is down 20% and the S&P 500 is down 13%. That’s the thing with MegaTrend stocks. They will get hit like other stocks in a broad downturn, but they’re the first ones back and will regain their past highs and keep going much faster than other stocks.

 

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