Rebuilding efforts in Texas and the recovery from the devastation of Hurricane Harvey will boost near-term profit for construction equipment companies like United Rentals.
"Major equipment rental operators, such as United Rentals, plan as soon as it`s evident a storm is going to hit," said Jefferies analyst Justin Jordan. "In the days leading up to Harvey, water pumps, temporary power generators, dryers and humidifiers went on rent with customers."
Jefferies estimates that United Rentals made about $60 million in immediate disaster recovery rentals. That could lift 2017 revenue and profit 1 percent for the world`s largest equipment rental company.
Jordan noted his current projections for United Rentals` 2017 revenue do not include multiyear demand for rental equipment, which is likely to drive earnings higher. Sensitive to the ongoing chaos and rising death toll in the aftermath of last week`s storm, the analyst says he has not yet focused on new price targets or estimates.
Jefferies` previous $150 price target on United Rentals shares (from January 2017) is 24 percent higher than Friday`s closing price. Jefferies has a buy rating on the stock.
"Given on-going nature of Hurricane Harvey disaster, it is too early to assess United Rentals revenue or profit benefit with any degree of precision," the analyst said. Still, he said he may raise estimates after hearing a business update on Hurricane Harvey`s impact at a United Rentals specialty event later this month.
United Rentals shares jumped more than 12 percent last week after Hurricane Harvey made landfall near Houston, causing widespread damage in Texas and Louisiana. As the most powerful hurricane to hit Texas in more than 50 years, Harvey will likely wind up being the most expensive natural disaster in U.S. history, costing the economy about $190 billion, according to AccuWeather.
United Rentals announced last month that it will buy construction equipment rental company Neff for about $1.3 billion. According to the Jefferies report, July 2017 U.S. nonresidential construction fell 4.3 percent year over year, which pushed United Rentals` shares down 6 percent over the past six months.
(c) 2017 Universal Solutions S.A.E. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers