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On Wednesday, Morgan Stanley (NYSE:MS) analyst Angel Castillo upgraded United Rentals (NYSE:URI) stock from Equalweight to Overweight, despite lowering the price target to $702.00 from $765.00. Castillo’s upgrade reflects a preference for United Rentals over original equipment manufacturers (OEMs) within the non-residential construction sector, which the firm views bearishly overall. According to InvestingPro data, URI’s stock has experienced significant volatility, with a 29% decline over the past six months, though current analysis suggests the stock is slightly undervalued based on Fair Value calculations.
Castillo highlighted several reasons for the upgrade. United Rentals’ limited direct exposure to tariff headwinds, coupled with strong pricing power over suppliers, was cited as a key factor in mitigating the risk of inflation. Additionally, the company’s ability to manage free cash flow through capital expenditure adjustments during economic downturns contributes to maintaining healthy leverage and liquidity levels. InvestingPro data supports this view, showing strong financial health metrics with a 40.5% gross profit margin and $1.9 billion in levered free cash flow over the last twelve months.
The analyst further noted the fungibility of United Rentals’ equipment, which allows the company to relocate its fleet to better-performing regions or mega projects, away from more challenged local projects. This flexibility is seen as a strategic advantage in the current economic landscape.
Another point of strength for United Rentals is the steady and long-term secular tailwinds from increasing rental penetration into the overall construction equipment market. This trend is expected to support the company’s growth prospects.
Finally, Castillo emphasized United Rentals’ strong balance sheet and disciplined capital allocation strategy. These factors are believed to position the company well to weather potential economic challenges and possibly capitalize on value opportunities through acquisitions or stock buybacks. The combination of these attributes underpins Morgan Stanley’s positive outlook on United Rentals stock. InvestingPro reveals additional insights about URI’s financial strength, with management actively buying back shares and maintaining a healthy 31% return on equity. For deeper analysis and 12 more exclusive ProTips, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Gildan Activewear (NYSE:GIL) has filed a report with the SEC that includes its Management Proxy Circular, Notice of Meeting, Form of Proxy, and the 2024 Annual Report. These documents are important for shareholders as they prepare for the upcoming annual meeting, offering a detailed overview of the company’s financial performance, including revenue and profits. Meanwhile, United Rentals has terminated its merger agreement with H&E Equipment Services, as disclosed in an SEC filing. This termination includes the withdrawal of a cash tender offer and the cancellation of a related bridge facility commitment letter. As part of the agreement, H&E Equipment Services will pay United Rentals a termination fee of $63,523,892. In analyst updates, Bernstein upgraded United Rentals’ stock rating from ’Underperform’ to ’Market Perform,’ although it lowered the price target to $666 from $705. BofA Securities maintained a Buy rating on United Rentals but reduced the price target to $750 from $850, citing a shift in expected valuation metrics. These developments reflect ongoing strategic and financial adjustments within the companies.
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