Shares of equipment rental company, United Rentals, Inc. (NYSE: URI) were up as much as 16 percent from Tuesday’s closing price, in morning trading Wednesday after the company reported a surprising second quarter profit, and raised its outlook for capital spending based on increased demand.
Net income in the three months to June 30 was $12 million, or 18 cents per share, reversing a loss of $17 million, or 28 cents, a year earlier. Revenue fell 9 percent to $557 million from $615 million a year ago.
Analysts polled by Thomson Reuters expected a loss of 30 cents per share on revenue of $525 million.
United Rentals also raised its outlook for net rental capital spending to $160 million to $180 million for the year, up from $100 million to $120 million seen previously, “to meet increased demand.” The figure measures the difference between spending on new rental equipment and sales of used rental equipment. The company also reaffirmed its outlook for free cash flow of between $200 million and $225 million for the year.
Rental use of the company’s fleet rose 4.1 percentage points 65.4%, a record for any second quarter, the company said. However, rental rates dipped 2 percent from the prior year.
“This was a strong quarter with a number of positive trends in the underlying metrics,” said United Rentals’ CEO Michael Kneeland in a statement. “Our same-store rental revenues increased 2.7%, with year over year growth in six of our nine operating regions. We reported the highest time utilization of any second quarter in our company’s history. Rental rates, while down year over year, improved sequentially each month. We are also running the business much more efficiently and spending capex where it counts, purchasing fleet that we are confident will be in demand by our target accounts.”
Kneeland also noted that United Rentals is expecting a “choppy” recovery, but believes the company is “seeing the early stages of a cyclical upturn on top of the normal seasonal benefit.”