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On Friday, BofA Securities analyst Ross Gilardi adjusted the price target for United Rentals (NYSE:URI) stock, reducing it to $750 from the previous $850 while maintaining a Buy rating on the company’s shares. Gilardi’s assessment underlines United Rentals’ strong financial position and market dominance as key factors for the continued positive outlook. The analyst highlighted the company’s robust balance sheet, noting its leverage ratio of 1.8 times compared to its peer H&E Equipment Services (NASDAQ:HEES), which stands at approximately 3.8 times.
The rationale behind the price target adjustment is attributed to a shift in the expected enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio for the year 2025. Gilardi now applies an 8 times multiple, down from 9 times, in response to what is perceived as a slowdown in construction indicators that seems to justify a lower valuation multiple for United Rentals. Current InvestingPro data shows the company trading at an EV/EBITDA multiple of 12.15x, with analysts forecasting earnings per share of $44.18 for fiscal year 2025.
Despite the reduction in the price target, United Rentals’ shares are described as being valued at a free cash flow (FCF) yield of around 6%. Gilardi suggests that while this yield is not at historically depressed levels, it is deemed to be more reasonably valued, especially when considered in the context of the 10-year benchmark. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with a free cash flow yield of 5% and levered free cash flow of $1.94 billion in the last twelve months.
The analyst’s commentary reaffirms a preference for United Rentals over its industry peers, including H&E Equipment Services, which is rated Underperform, as well as rental suppliers like Terex Corporation (NYSE:TEX) and Oshkosh Corporation (NYSE:OSK), which also carry Underperform ratings. This preference is rooted in United Rentals’ leading market position and its capacity for capital expenditure flexibility.
In summary, BofA Securities signals confidence in United Rentals’ future performance despite the revised price objective, underpinned by the company’s financial strength and strategic advantages within the rental sector.
In other recent news, United Rentals, Inc. has terminated its merger agreement with H&E Equipment Services, Inc. The termination, mutually agreed upon by both parties, results in H&E paying United Rentals a termination fee of approximately $63.5 million. This decision follows United Rentals’ withdrawal of its cash tender offer to acquire all outstanding shares of H&E. The termination also leads to the cancellation of a bridge facility commitment letter intended to finance the merger, involving financial institutions like Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC). Meanwhile, Herc Holdings (NYSE:HRI) Inc. announced a binding acquisition proposal with H&E, offering a deal valued at $104.89 per share, which was deemed superior to United Rentals’ previous offer. Analysts at Raymond (NSE:RYMD) James reaffirmed an Outperform rating for United Rentals, setting a price target of $925, emphasizing the company’s disciplined capital allocation. Following the termination, United Rentals plans to resume its share repurchase program, with $250 million remaining under its current authorization.
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