Why United Rentals Stock Plunged by Nearly 15% This Week
Key Points
Investors punished it for missing analyst estimates in its fourth quarter.
They weren't all that happy about full-year revenue guidance either.
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In recent days, investors have opted not to park their money in equipment leasing specialist United Rentals (NYSE: URI). That's because the company delivered quarterly results that fell short of analyst estimates for both revenue and profitability. Compounding that, a pundit at a very prominent bank cut his price target on the shares.
Ultimately, across the five trading days of this week, United Rentals' stock fell by almost 15%, according to data compiled by S&P Global Market Intelligence.
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Fourth-quarter flop
United Rentals' fourth-quarter and full-year results were published on Wednesday. These revealed that the company's revenue was $4.21 billion, nearly 3% higher year over year. On the other hand, net income in accordance with generally accepted accounting principles (GAAP) decreased by 5% to $653 million. Non-GAAP (adjusted) net profit per share also slumped, dropping to $11.09 from the year-ago $11.59.
Image source: Getty Images.
Unfortunately for the company and its stockholders, neither line item met the consensus analyst estimates. Prognosticators covering United Rentals expected the company would earn $4.24 billion in revenue and net $11.78 per share in adjusted profit.
Mr. Market was likely also unsatisfied with United Rentals' guidance, which didn't exceed expectations. The company said it anticipates full-year 2026 revenue of $16.8 billion to $17.3 billion; the just-under $17.1 billion consensus analyst estimate falls almost squarely in the middle of that range.
An unforgiving market
Nothing in United Rentals' quarterly results looks particularly bleak to me. In fact, there are numerous factors in the company's favor; I'm thinking specifically of its specialty equipment business, which has been a growing corner of its operations for years now. Still, investors want higher revenue growth and an improving bottom line, and with this earnings report, they didn't get either.
On top of that, no less an institution than Bank of America cut its price target on the stock. That slice wasn't very deep --analyst Michael Feniger reduced it to $1,020 per share from $1,050 while maintaining his buy recommendation. Still, coming on the heels of a badly received earnings report, it didn't help improve sentiment on the stock.
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Bank of America is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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