United Rentals is the largest equipment rental company in the world with a fleet of over 1M rental units in 4.6k different equipment classes offered at 1.5k locations. The company purchases construction and industrial equipment from its suppliers and rents the equipment to its customers for a fee. United maintains and services the equipment over its useful life cycle and then sells the equipment, usually to its customers, at the optimal time. Most of the company’s operations are in the U.S. and Canada (96% of locations), with a much smaller presence in Europe, Australia and New Zealand.
Nice write-up. When I did the historical RoIIC including acquisitions & stock paid out for acquisitions I get a 5-yr RoIIC of 7-11% including goodwill. I guess part of the higher RoIIC going forward is the option to invest in these business @ TBV vs. FMV (including GW) but this would be offset by any acquisitions they make to sustain a higher growth rate. Ashtead has RoIICs in the 16-17% range with growth much more tilted towards organic growth (about 67% of growth) & probably more tilted towards clustering of smaller & mid-sized customers. Ashtead has about a 2% high dollar utilization (5-yr average of 54% vs. 52%) reflecting the clustering focus despite its smaller size & with only about 50% of the markets clustered. I have not seen any type of clustering discussion in URIs investor materials, have you?
Thanks. They haven't mentioned clustering specifically but they do mention increasing transfers between locations does increase dollar utilization. And you're right, Ashtead has good returns as well.
Hi YoungHamilton, great post. Thank you for the work!
There was a little bit of discussion in one of your previous comments, but I wanted to get more colour. But how URI compares against Ashtead? What aspects would you say are better in URI versus Ashtead (and vive versa)? I am researching the industry for the first time, but one think that has surprised me a little bit is that if economies of scale are so important in this business, why Ashtead has been able to reach a higher return on capital? (Sunbelt has a lower market share than URI). I understand that a rate of return is an accounting measure and may have been distorted by acquisitions (i.e., URI paying up more), but is there anything else that we should be aware of? Also, how does compare in terms of profitability an international rental business versus a US one?
Thank you in advance for your thoughts, and sorry for the length of the questions!
Thanks for reading. I don't know if I'll have great answers for you here. I think that Ashtead has a lower mix of enterprise level customers, which does help them negotiate on pricing. And you're right the traditional measures of returns on capital are a little distorted by acquisitions.
Let me know what you find as you dig into Ashtead more.
The biggest difference IMO is the clustering (which lead to higher margins) & Ashtead's ability to get last minute business which increases dollar utilization & margins (65% of Ashtead's rentals are less than 24 hours before the rental occurs). Ashtead also focuses more on SME (30% nat'l accounts vs. 44% for URI) vs. large customers so has more pricing power.
Most excellent work friend!
Thanks!
Nice write-up. When I did the historical RoIIC including acquisitions & stock paid out for acquisitions I get a 5-yr RoIIC of 7-11% including goodwill. I guess part of the higher RoIIC going forward is the option to invest in these business @ TBV vs. FMV (including GW) but this would be offset by any acquisitions they make to sustain a higher growth rate. Ashtead has RoIICs in the 16-17% range with growth much more tilted towards organic growth (about 67% of growth) & probably more tilted towards clustering of smaller & mid-sized customers. Ashtead has about a 2% high dollar utilization (5-yr average of 54% vs. 52%) reflecting the clustering focus despite its smaller size & with only about 50% of the markets clustered. I have not seen any type of clustering discussion in URIs investor materials, have you?
Thanks. They haven't mentioned clustering specifically but they do mention increasing transfers between locations does increase dollar utilization. And you're right, Ashtead has good returns as well.
Hi YoungHamilton, great post. Thank you for the work!
There was a little bit of discussion in one of your previous comments, but I wanted to get more colour. But how URI compares against Ashtead? What aspects would you say are better in URI versus Ashtead (and vive versa)? I am researching the industry for the first time, but one think that has surprised me a little bit is that if economies of scale are so important in this business, why Ashtead has been able to reach a higher return on capital? (Sunbelt has a lower market share than URI). I understand that a rate of return is an accounting measure and may have been distorted by acquisitions (i.e., URI paying up more), but is there anything else that we should be aware of? Also, how does compare in terms of profitability an international rental business versus a US one?
Thank you in advance for your thoughts, and sorry for the length of the questions!
Thanks for reading. I don't know if I'll have great answers for you here. I think that Ashtead has a lower mix of enterprise level customers, which does help them negotiate on pricing. And you're right the traditional measures of returns on capital are a little distorted by acquisitions.
Let me know what you find as you dig into Ashtead more.
The biggest difference IMO is the clustering (which lead to higher margins) & Ashtead's ability to get last minute business which increases dollar utilization & margins (65% of Ashtead's rentals are less than 24 hours before the rental occurs). Ashtead also focuses more on SME (30% nat'l accounts vs. 44% for URI) vs. large customers so has more pricing power.