Earnings call transcript: United Rentals Q3 2025 misses EPS, revenue beats

United Rentals Inc. (URI) reported its third-quarter earnings for 2025, revealing an adjusted earnings per share (EPS) of $11.70, which fell short of the forecasted $12.32. Despite this miss, the company surpassed revenue expectations with $4.23 billion against a forecast of $4.16 billion, marking a 5.9% year-over-year increase. Following the announcement, United Rentals’ stock fell 3.19% in the market, closing at $965. According to InvestingPro data, the stock currently trades at a P/E ratio of 24.8x, suggesting premium valuation levels relative to near-term earnings growth. The company’s market capitalization stands at $61.76 billion, making it a prominent player in the Trading Companies & Distributors industry.

Key Takeaways

• United Rentals’ EPS of $11.70 missed the forecast by 5.03%.
• Revenue exceeded expectations, rising to $4.23 billion, a 5.9% increase YoY.
• Stock price declined by 3.19% post-earnings announcement.
• Specialty rental revenue saw an 11% year-over-year increase.
• Full-year revenue guidance remains strong at $16.0-$16.2 billion.

Company Performance

United Rentals demonstrated solid revenue growth, driven by a 5.8% increase in rental revenue, achieving a record $3.7 billion for the quarter. The company continues to expand its specialty rental business, which grew 11% year-over-year, contributing to its diversified revenue streams. InvestingPro analysis reveals the company maintains a GOOD Financial Health Score of 2.95, with particularly strong profitability metrics. The company’s revenue growth of 6.77% over the last twelve months and beta of 1.73 indicate both steady expansion and higher market sensitivity. For deeper insights into URI’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $4.23 billion, up 5.9% YoY
• Adjusted EPS: $11.70, below the forecast of $12.32
• Adjusted EBITDA: $1.9 billion, with a 46% margin
• Year-to-date free cash flow: $1.2 billion

Earnings vs. Forecast

United Rentals reported an EPS of $11.70, missing the forecast by 5.03%. However, the company exceeded revenue expectations by 1.68%, achieving $4.23 billion against the anticipated $4.16 billion. This mixed performance indicates strong revenue growth but challenges in maintaining expected profit margins.

Market Reaction

Following the earnings release, United Rentals’ stock experienced a decline, dropping 3.19% to $965. This movement reflects investor concerns over the EPS miss, despite the positive revenue surprise. The stock remains within its 52-week range, having previously reached a high of $1,021.47.

Outlook & Guidance

United Rentals maintains its full-year revenue guidance of $16.0-$16.2 billion, projecting continued growth into 2026. The company plans to increase capital expenditures to $4.0-$4.2 billion, focusing on fleet expansion and repositioning to meet large project demands. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value. InvestingPro subscribers have access to 12 additional key insights about URI, including detailed valuation metrics and growth indicators that can help inform investment decisions.

Executive Commentary

CEO Matt Flannery expressed optimism, stating, "The year is playing out better than we originally expected," highlighting confidence in the company’s strategic direction. CFO Ted Grace emphasized the focus on profitable growth, despite the current margin pressures.

Risks and Challenges

• Increased delivery costs impacting margins.
• Fleet repositioning for large projects adding operational costs.
• Potential interest rate changes affecting construction market demand.
• Local market fluctuations posing challenges to revenue consistency.
• Margin compression due to ancillary service costs.

Q&A

During the earnings call, analysts questioned the impact of fleet repositioning on operational costs and margins. Executives addressed concerns about the potential effects of interest rate cuts on the construction market, emphasizing their strategic focus on mergers and acquisitions to drive growth.

Full transcript - United Rentals (URI) Q3 2025:

Operator: Morning and welcome to the United Rentals Investor Conference Call. Please be advised this call is being recorded. Before we begin, please note that the Company’s press release, comments made on today’s call, and responses to your questions contain forward-looking statements. The Company’s business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control, and consequently actual results may differ materially from those projected. A summary of these uncertainties is included in the Safe Harbor statement contained in the Company’s press release. For a more complete description of these and other possible risks, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as well as to subsequent filings with the SEC. You can access these filings on the Company’s website at www.unitedrentals.com.

Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances, or changes in expectations. You should also note that the Company’s press release and today’s call include references to non-GAAP terms such as free cash flow, adjusted EPS, EBITDA, and adjusted EBITDA. Please refer to the back of the Company’s recent investor presentation to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer, and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Mr. Flannery, you may begin.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thank you, operator, and good morning, everyone. Thanks for joining our call today. I’ll apologize in advance for my voice as I’m fighting through a little cold here, but I’m sure we’ll get through it okay. Yesterday afternoon, we were pleased to report our third quarter results. The hard work of our nearly 28,000 employees enabled record revenue and adjusted EBITDA. The year is playing out better than we originally expected, and our updated guidance reflects the demand environment we continue to successfully serve. In short, our unique value proposition, experience, and ability to support a broad range of our customers’ needs distinguishes us from the competition. Last quarter, I spent a lot of time on the road visiting branches, job sites, and meeting with customers. While this is nothing new, it did make the quarter’s results and our subsequent guidance update no surprise.

From my perspective, our branches are very busy and the team’s working hard to serve customer demand. Our people are true differentiators in the rental industry and their professionalism and knowledge, their expertise, and their commitment day in and day out shows. We often talk about putting the customer at the center of everything we do as it feeds our flywheel of growth. Without the dedicated United Rentals team members safely executing our customer-centric model, we could not generate the success we continue to deliver. From where I sit today, I expect this momentum to carry into 2026. In the third quarter specifically, we again saw growth across both our general rental and specialty businesses. With optimism from the field and our Customer Confidence Index, we are reinforcing our expectations going forward. The demand for used equipment also remains healthy.

Now, with that said, let me get into the review of our third quarter results and our updated 2025 guidance, and then Ted will review the financials in detail before we open the line for Q and A. Let’s start with the quarter’s results. Our total revenue grew by 5.9% year over year to $4.2 billion, and within this, rental revenue grew by 5.8% to $3.7 billion, both third quarter records. Fleet productivity increased 2%, contributing to OER growth of 4.7%. Adjusted EBITDA increased to a third quarter record of over $1.9 billion, resulting in a margin of 46%, and finally, adjusted EPS came in at $11.7. Now, turning to customer activity, as I mentioned, we saw growth across both our general rental and specialty businesses in the quarter.

Specialty continues to post double-digit increases with rental revenue up 11% year over year, driven by growth across all our product offerings and an additional 18 cold starts. Year to date, we’ve opened 47 cold starts as we continue to fill out our specialty footprint. We see this, combined with the power of cross-sell and the addition of new products to our portfolio, as critical points of competitive differentiation which benefit our customers while also providing important drivers of long-term growth. By vertical, our construction end market saw strong growth across both infrastructure and nonresidential construction, while our industrial end market saw particular strength within power. We continue to see new projects kicking off, and while data centers are certainly one area of growth, we also saw new projects across infrastructure, semis, hospitals, LNG facilities, and airports, to name just a few.

Our end-market exposure by vertical is intentionally diversified, and our equipment is fungible to ensure we can serve demand no matter where it presents itself. Now turning to the used market, we sold $619 million of OEC at a recovery rate of 54%. The demand for used equipment is healthy, and we’re on track to sell approximately $2.8 billion of fleet this year. As I mentioned in my opening remarks, the year is playing out better than we initially expected. To meet this demand, we spent nearly $1.5 billion of CapEx in the quarter and now expect to spend over $4 billion on fleet this year. This positions us not only to capitalize on the current environment, but also for the anticipated growth in 2026.

Our customers and the field remain optimistic, particularly around large projects and key verticals, and thanks to our go-to-market approach and one-stop shop value proposition, we believe we’re well positioned to be the partner of choice for these projects. Year to date, we’ve generated free cash flow of $1.2 billion with the expectation to generate between $2.1 and $2.3 billion for the full year, including the impact of our higher CapEx spend. As a reminder, the combination of our industry-leading profitability, capital efficiency, and the flexibility of our business model enables us to generate meaningful free cash flow throughout the cycle and in turn allocate that capital in ways that allow us to create long-term shareholder value. Speaking of capital allocation, we always start with ensuring the balance sheet is in good place, and it is.

We then fund organic growth reflected through our CapEx and complement this with inorganic growth that makes financial and strategic sense, and the remainder we return to shareholders. This quarter specifically, we returned over $730 million to shareholders through a combination of share buybacks and our dividend. For the full year, we remain on track to return nearly $2.4 billion to shareholders. Our leverage of less than 1.9 times leaves plenty of dry powder to support disciplined M&A, where we continue to pursue opportunities to put capital to work and attractive returns. Our M&A pipeline remains robust within both general rental and specialty and across a spectrum of deal sizes.

While it’s difficult to predict the timing of M&A, this is an important capability we’ve built over our company’s history, and we’ll continue to use it to enhance our business and drive shareholder value as we enter the final months. In 2025, we’re focused on execution and delivering the results outlined in our updated guidance, including total revenue growth of 5% or 6% ex used, strong profitability, robust free cash flow, and returns above our cost of capital. Although our growth is coming with some additional costs, which Ted will cover in his remarks, we’re working through these challenges and are taking proactive measures, including bringing in additional fleet to help mitigate fleet movement costs. I’m very pleased with 2025 and how it’s playing out ahead of our initial expectations and see good momentum heading into next year.

Based on what we see today, 2026 will be another year of healthy growth. We believe the tailwinds we’ve discussed throughout this year will carry over, and our unrelenting focus on being the partner of choice for our customers positions us very well to win this business and to outperform the industry. For now, we won’t get into the specifics about 2026 as we’re in the middle of our planning process, but we will share more details in January as we always do. In closing, I’m pleased with the outstanding job the United Rentals team is doing to support our customers, and that’s the starting point for everything we do. Not only do we have the scale, technology, and value proposition to make us the preferred partner, but we have a history of execution our customers can rely on.

By working together with our customers to meet their goals to drive safety, productivity, and efficiency, we ensure we build a relationship of trust that positions us to win in the marketplace. Subsequently, our strategy, business model, competitive advantages, and capital discipline allow us to generate compelling shareholder returns for the long term. With that, I’m going to hand the call over to Ted, and then we’ll take your questions. Ted, over to you.

Ted Grace, Chief Financial Officer, United Rentals: Thanks, Matt, and good morning everyone. As you just heard, the year continues to progress well with third quarter records across total revenue, rental revenue, and EBITDA. More importantly, based both on what we’re seeing and hearing from customers, we expect the strong demand to continue, which is supporting our increases in both rental revenue and CapEx guidance. More on that in a minute, but first let’s go through this quarter’s numbers. As you saw in our press release, rental revenue increased $202 million year over year, or 5.8%, to a third quarter record of $3.67 billion, supported again by growth from large projects and key verticals. Within this, OER increased by $133 million, or 4.7%, driven by 4.2% growth in our average fleet size and fleet productivity of 2%, partially offset by fleet inflation of 1.5%.

Also within rental, ancillary and rerent grew over 10%, adding a combined $69 million of revenue. Consistent with our first half results, third quarter ancillary growth again outpaced OER as we continue to focus on supporting our customers. Moving to used, we generated $333 million of proceeds at an adjusted margin of 45.9% and a 54% recovery rate, while OEC sold set a third quarter record at $619 million combined. These results speak to the continued strength and health of the used equipment market. Turning to EBITDA, adjusted EBITDA increased $42 million year on year to an all-time record of $1.95 billion. Within this, a $69 million increase in rental gross profits was partially offset by a $6 million decline in used gross profit dollars. SG&A increased $23 million, which is in line with revenue growth, while other non-rental lines of businesses added $2 million.

Looking at profitability, our third quarter adjusted EBITDA margin was 46.0%, implying 170 basis points of compression on an as-reported basis and 150 basis points ex-used. At a high level, margin dynamics in the third quarter were similar to what we’ve discussed the last several quarters. This includes the impact of ancillary, the strategic investments we’re making in the business, and still relatively elevated inflation. An area I might call out again this quarter was delivery, which was impacted both by higher fleet repositioning costs in support of large projects and our use of third-party outside haul to serve the stronger than expected demand seen during our seasonal peak. To try to put this in perspective, our third quarter delivery costs increased 20% year on year versus a roughly 6% increase in rental revenue.

Simply assuming that these costs increase proportional to revenue, this gap implies over $30 million of additional cost year on year and translates to an almost 80 basis points drag on our EBITDA margins. I’m sure we’ll talk more about this during Q&A, but this provides a great example of the balance we are constantly managing between capital in the form of fleet and costs, both fixed and variable, with the goal of serving customers as efficiently as possible. Shifting to CapEx, third quarter gross rental CapEx was $1.49 billion. I’ll speak more to this in a moment, but this included the acceleration of some purchases to help us support the stronger than expected demand we are experiencing.

Moving to returns and free cash flow, our return on invested capital of 12% remains comfortably above our weighted average cost of capital, while year to date free cash flow was $1.19 billion. Our balance sheet remains very strong with net leverage of 1.86 times at the end of September and total liquidity of over $2.45 billion. I’ll note this was after returning $1.63 billion to shareholders year to date, including $350 million via dividends and $1.28 billion through repurchases. In total, between dividends and share repurchases, we still plan to return almost $2.4 billion in cash to our shareholders this year. This equates to a little better than $37 per share for a return of capital yield of almost 4%. Now let’s shift to the updated guidance we shared last night, which reflects our confidence in delivering another year of solid results.

As you’ve heard us say a few times this morning, we are seeing stronger than expected demand. In response, we accelerated the landing of some fleet into Q3 while also raising our full year CapEx guidance by $300 million at midpoint to a range of $4 billion to $4.2 billion. In turn, we are increasing our total revenue guidance by $150 million at midpoint while narrowing the range to $16 billion to $16.2 billion, implying full year growth of roughly 5% at midpoint. Within this, our used sales guidance is unchanged at around $1.45 billion, which implies total revenue growth ex-used of 6% at midpoint. I’ll note that the additional CapEx accounts for roughly half of the increase to our revenue guidance, given we’ll only realize a partial year of OER benefit with the balance coming from ancillary.

On the EBITDA side, we are narrowing our range to $7.325 to $7.425 billion while maintaining the midpoint at $7.375 billion. Ahead of Q&A, I’ll quickly mention that the lack of implied pull through from this additional revenue request reflects our expectation that, as I just mentioned, a portion of the increase will come from lower margin ancillary, while we also expect to manage through similar cost dynamics in Q4, especially delivery. Turning to cash flow, we reaffirmed the midpoint of our guidance for cash flow from operations at $5.2 billion, while our revised free cash flow guidance of $2.1 to $2.3 billion simply reflects the additional investment in CapEx that we plan to make. Importantly, our updated free cash flow guidance does not impact our share repurchase program.

I’ll remind you that we intend to repurchase $1.9 billion of shares this year, which highlights our strategy of both investing in growth and returning excess capital to our shareholders. To wrap up my prepared remarks, overall we were pleased with how the quarter played out, especially on the demand side, and while our margins were burdened by the cost mentioned, we remain focused on supporting our customers’ growth as efficiently as possible as we lean into their demand. With that said, let me turn the call over to the operator for Q&A. Operator, please open the.

Operator: At this time, if you’d like to ask a question, please press the Star and one keys on your telephone keypad. Keep in mind you can remove yourself from the question queue at any time by pressing Star and two. Again, it is Star and one to ask a question. Today, we’ll take our first question from David Rasso with Evercore ISI. Please go ahead. Your line is open. Hi.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thank you for the time. Obviously we have the demand positive and the cost negative here. I just wanted to dive into the demand side first. The cadence of the CapEx. When I think about 2026 in the comment, you accelerated equipment for the third quarter. Just so we’re clear, when you’re thinking of the demand profile that you said was better than you expected, is any of this 2025 CapEx increase pulling forward 2026? If not, just thinking about the cadence of the CapEx for 2026. Obviously when you bring this much fleet on the third quarter, people wonder how do we go into 2026 with a level of fleet just given the seasonal weakness. That’s a demand question. I’ll follow up with a quick cost question. Sure, David, I’ll take that. This was not a pull forward from 2026.

This accelerated CapEx in Q3 was to meet the demand that we were already seeing and to be responsive to specifically some large project wins throughout the year. That put a little more need for fleet here in the back half. Then we let the Q4 CapEx flow through as it normally would as some of that is seasonal. To your point about 2026, all of this, although not a pull forward, is supported by being very comfortable that we expect 2026 to be a growth year, which is why we felt comfortable raising this full year CapEx. As far as CapEx cadence for next year, we haven’t finished our planning process, but you can expect there to be the standard. Let’s say we’re going to sell $2.8 billion, maybe a little bit more in CapEx next year.

A replacement for that’s going to be $3 billion, $4 billion plus, depending on how much more we sell. Then there’ll be growth on top of that. That’s the part that we’re going to work through in the planning process this year. To be clear, we certainly expect to have some growth CapEx here in 2026. We’ll let you know about the cadence of that as we see how the demand plays out. Okay, thank you. On the cost side, it’s easier for me to say, but ancillary revenues are up to close to 18% of total rental revenue. How do we think about pricing for those services? I appreciate the comment. Providing those services is partly why you win more than your fair share of the major projects. It went from sort of an afterthought to, again, if you want to throw in rerent, it’s 20% of rental revenue.

Is there a way to rethink that pricing, some kind of annual contract, something where it does not continue to be a drag? Related to that, the fleet productivity number. I know you do not like going into the details, but can you give us some sense of the components of fleet productivity? Were both utilization rate up, one up, one down? Just trying to get a sense of those components as we sort of push against the cost. Thank you. I will take the latter part there, David, on fleet productivity, and then Ted can add some color on the ancillary. On the ancillary, I do want to remind you that a big portion of this is delivery, which is basically a pass-through fuel, which is not a large markup. There are just some things there that have historically been.

It is a fair point about the pricing, but as we think about that, and Ted can get into the detail of the math of how that impacts us, there is nothing new other than we are doing more of it as we continue to serve more products and services. The fleet productivity, as I stay true to telling you, qualitatively, we are very pleased with how rate and time have performed throughout the year. Specifically in Q3, I would say the gap, the difference between what you saw in Q2 at 3.3% fleet productivity and Q3 at 2% was mix. Mix was a good guy for us in Q2 and not in Q3. We would see that as normal variability.

It is important for us to remind you all that mix is just, we are catching that, we are not driving that. That is a result of who you rent to, how you rent, to what you rent, how long, what geography. It is not anything that we have any capability to predict, quite frankly, because it is reactive and responsive to where the demand is. We just let you know that. To be clear, rate and time are both up this year and we feel good about it.

Ted Grace, Chief Financial Officer, United Rentals: On the margin side, within ancillary, David, obviously the thought there is you want to be responsive to the customer. It all kind of ties back to this concept of being the partner of choice. Frankly, it’s hard for us to predict what that mix will look like between something like pickup and delivery or installation, breakdown, setup, fueling, et cetera. The margins themselves don’t fluctuate a tremendous amount, but they are what they are. Delivery, to Matt’s point, is probably the thinnest of that. That’s really kind of just the convention of the industry. Others are certainly not going to have the kind of margins that we have in rental, but as we’ve said, they’re definitely positive and they add GP dollars with very little capital coming along with that. We think they benefit us both strategically and financially.

It’s going to drive kind of variability depending on what that composition looks like.

Matt Flannery, President and Chief Executive Officer, United Rentals: All right, I appreciate that. Thank you. Thanks, David.

Operator: We’ll take our next question from Rob Wertheimer with Melius Research. Please go ahead. Your line is open.

Ted Grace, Chief Financial Officer, United Rentals: Yes, thank you.

Matt Flannery, President and Chief Executive Officer, United Rentals: Good morning, everybody. You’ve mentioned a few times across the call solid demand indicators kind of driving some of the CapEx move. Could you talk a little bit qualitatively about what that looks like in the field? Is this mega projects that we all knew about but are finally coming online? Is this share gain as people appreciate it? Is this interest rate sensitive construction having bought what’s kind of going on? Thank you. Sure. Rob, as we’ve talked about really for the past year plus, there’s some feedback there from somebody. As we talked about, large projects are really carrying the ball here. We feel really good about that. When asked what surprised us, we had a higher win rate than maybe we had originally planned for, and that’s what the additional CapEx was for.

As far as the local markets, the local markets we would call flattish, it’s very choppy. In certain markets, there’s a little bit more opportunity than others, but I’d call it net across the network, probably flat on the local. The growth is really coming from major projects which are robust, and we expect to do well. I’m glad to see the teams executing on that. Thank you. The fleet repositioning that’s been there this quarter and before, that’s related to that shift in demand. Does that have an end date to it where you’ve kind of got stuff moved around where you want it, or is that just a new world where projects are bigger and in different places? I’ll stop there. Thanks. Part of that is think about the disbursement of revenue.

Think about a couple years ago when we talked about broad-based demand and our network was a real advantage for us because we could just serve more demand out of our same cost basis basically with some variable costs. Now, as these major projects are throughout our network, they’re chunks of revenue that we have to move fleet to from certain places and in many instances have some additional cost with these mega projects of building an on-site and a support team there. I’d say that’s a dynamic. The part that surprised us the most, and we’ve been very upfront about this, is the delivery mobilizing that fleet to these sites, whether they be remote or not, you’re mobilizing it from multiple areas. That’s a little bit different cost that we have to absorb.

When we were spreading it throughout the network in the local markets, it just didn’t have that additional cost burden. Outside of that, I wouldn’t call out anything different. When you look at these decisions on their own, the math makes sense. They’re good decisions. It’s just some additional costs that you don’t have to incur when you’re not so weighted on the large projects.

Operator: Thank you.

Ted Grace, Chief Financial Officer, United Rentals: Sure.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thanks, Rob.

Operator: We’ll take our next question from Michael Feniger with Bank of America. Please go ahead. Your line is open.

Ted Grace, Chief Financial Officer, United Rentals: Great.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thanks guys for squeezing me in. Matt, just on the local market, it.

Operator: Seems like.

Matt Flannery, President and Chief Executive Officer, United Rentals: Signaling 2026 is a growth year. Is that inclusive of the local market or is that more on the larger projects? If we see rate cuts, does that alone get the local markets back? Historically, there’s been a delay between rate cuts and construction picking up. Those rate cuts happen in deep recession. I’m curious if you feel the feedback loop from rate cuts is a little shorter than normal in terms of when that pipeline might fill up. That’s more of a second half next year type of event. We don’t pretend to know how that will play out. If you look at history, there are different outputs, so you can’t even look at history and hope it’ll repeat itself because it’s been different during different cycles.

Sentiment feels a little bit better with there being a rate cut and talk of more rate cuts, but you don’t take sentiment to the bank. Right now, we call local markets flat. We’re going to go through our planning process for the balance of this quarter. That will inform our guidance, and we’ll get a little bit closer to the local market as we talk to the branch managers and the district managers that are much closer to that, and they’ll give us their feedback, what they think their growth potential is locally, outside of large projects. Then we’ll have a better idea. I agree with the tone of the sentiment. We just have to see does our team think when that’s going to manifest and how we’re going to capitalize that growth. We’ll be excited for that to happen. We do think it’s potential upside.

Whether that’s 2026, the back half, 2026, 2027, we’re not even sure yet. It’s something that we’ll communicate when we give out guidance. Perfect. Matt, you mentioned accelerated CapEx to meet the demand. Did large projects, do you see anything that got greenlit that maybe was on the fence? Are you seeing United Rentals’ typical win rate starting to inch up versus prior years? Just to tag on that, Ted, if there’s any way you could help quantify where you think that power vertical for you guys, how big you think that is today for you guys, versus maybe where it was a few years ago. Thanks everyone. I would just say we’ve just had greater success, and the customers that rely on us have had greater success on these large projects, and the pipeline’s robust.

I would say that’s what drove the extra demand, is really just good execution from the team. I’ll let Ted talk to the power vertical.

Ted Grace, Chief Financial Officer, United Rentals: Yeah, Mike, thanks for the question. It’s currently low double digits, say 11-12%. It’s probably a reasonable area. If you go back to when we introduced what we called our power vertical strategy, and just to be clear, this is really a focus on investor-owned utilities, whether it’s generation, transmission, or distribution. At the time in 2016, it was probably 4%. We’re probably coming up on nearly tripling that relative exposure to what we think is, at the time we thought would be, a very large, stable business. It’s very large. It’s obviously seen a lot of investment, and we expect that to certainly continue for the long foreseeable future. We feel like we’re really well positioned there, and we’ve spent the better part of a decade building what we think is a lot of competitive advantages to serve those customers in that market uniquely.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thank you.

Operator: We’ll take our next question from Steven Fisher with UBS. Please go ahead. Your line is open.

Ted Grace, Chief Financial Officer, United Rentals: Thanks.

Matt Flannery, President and Chief Executive Officer, United Rentals: Good morning. I just wanted to ask about the.

Operator: Come back to the margin dynamics here.

Matt Flannery, President and Chief Executive Officer, United Rentals: Just looking at the Q2 versus Q3 year over year, Specialty going from 220 basis points to 490 basis points headwind. It sounded like qualitatively that the drivers weren’t really that different categorically. Just curious what accounts for that difference in year over year. Was there sort of faster growth in Yak that was driving more of that delivery impact or what accounts for the 220 versus 490. Thanks.

Ted Grace, Chief Financial Officer, United Rentals: Yeah, absolutely, Steve. Thanks for the question. Overall, I would say the cost dynamics within specialty and, frankly, the whole business have been pretty consistent across the year. When you look specifically at specialty 2Q versus 3Q, the big difference was the increase in depreciation we had in that, and that spoke to the aggressive investment we’re making in Yak more than anything in matting. Those assets get depreciated at a far faster pace than any other asset class we have in that business. When you look at the 490 basis point decline, 200 basis points of that was depreciation, so call it 40%. The other pieces were the same things we’ve talked about, like delivery and really ancillary being the other big piece.

Matt Flannery, President and Chief Executive Officer, United Rentals: Okay, that’s helpful. I think you are on track or planning to do 50-ish cold starts this year. Sounds like you’re pretty close to that already. Do you think that momentum is likely to continue into the fourth quarter, and any sense of having done 70-plus last year and maybe on track for 50-plus this year, directionally where you see the cold starts heading for next year? We haven’t finished the planning process yet, as I said earlier, and that’s where we’ll make those decisions. As far as the balance of the year, we’re in a small period here in Q4. Maybe there’ll be another 10 to a dozen in Q4. It really depends on the timing of if the team finds the real estate and the bodies to be able to do it. As far as 2026, stay tuned.

The team’s executed real well on cold starts here in 2025, and they’ll propose the plans for 2026 in the next six weeks.

Operator: Terrific.

Matt Flannery, President and Chief Executive Officer, United Rentals: Congratulations. Thanks.

Operator: We’ll take our next question from Jamie Cook with Truist Securities. Please go ahead. Your line is open.

Matt Flannery, President and Chief Executive Officer, United Rentals: Hi, good morning. I guess just two questions. The setup for 2026, obviously ancillary is.

Ted Grace, Chief Financial Officer, United Rentals: Just becoming a larger part of it just sounds like structurally that will be a headwind on margins.

Matt Flannery, President and Chief Executive Officer, United Rentals: I guess, Matt or Ted, I’m just trying to think about, obviously you’re.

Ted Grace, Chief Financial Officer, United Rentals: Seeing demand is starting to.

Matt Flannery, President and Chief Executive Officer, United Rentals: Improve or maybe your share is just improving. I’m just wondering, the setup in.

Ted Grace, Chief Financial Officer, United Rentals: 2026 with a lot of the inflationary pressures, in particular with tariffs in section.

Matt Flannery, President and Chief Executive Officer, United Rentals: 232, you have the ancillary business becoming larger. To what degree do you think we can start to push through higher rental rates? Is the market strong enough that they could absorb that just given some of the cost headwinds that we could see continuing into 2026? Thank you.

Ted Grace, Chief Financial Officer, United Rentals: Yeah, good question, Jamie. We don’t want to get too far ahead of ourselves, but certainly if you just take a step back and you decompose what’s happened in 2025 as a starting point, a lot of the margin dynamics have been being responsive to customers. You touched on ancillary, but obviously that is dilutive and you could ask yourself, why are you doing that? Again, it’s to really be this partner of choice and be responsive and frankly use that as a tool to be a better partner and take share. We think that’s absolutely worked out. While it is dilutive to margins, as we’ve talked about, there are a lot of benefits to it. How does that play out next year? Time will tell.

We don’t think that’s bad business, but we’ll have a sense for what that’s going to look like over the next six weeks as we get through the business planning process. You think about things like cold starts and investments. I don’t think anybody would dispute the logic, strategic or financial, of the cold starts we’re doing in specialty. To your question on inflation, broader inflation, it’s still elevated, as I said in my prepared remarks. Is it going to subside in 2026? Time will tell. Certainly we are very aggressively managing our costs in any environment, but certainly in this one. You come to the delivery piece and that’s obviously been kind of the biggest discrete challenge we face this year. That’s driven a lot by being responsive to customers. That’s what has helped support the demand and the growth you’ve seen.

We’re trying to figure out that piece next year. What is the growth, what does it look like from a physical footprint standpoint, and then how do we most effectively serve it? Matt talked about the idea of managing CapEx differently such that you could mitigate some of that incurred cost moving fleet. We’re working through that. That again is being responsive to where demand is and supporting our customers. All that is to say that we’re looking at those things. They will all affect 2026 margins and flow through. The focus, as always, is on profitable growth. From that standpoint, we think the team’s managing the business really well.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thank you.

Operator: We’ll take our next question from Kenneth Newman with KeyBanc Capital Markets. Please go ahead. Your line is open.

Matt Flannery, President and Chief Executive Officer, United Rentals: Hey, thanks. Good morning, guys. Morning. Maybe to follow up on that response now, Ted, I think, Matt, you mentioned growing the fleet for both stronger demand but also maybe to better address the fleet movement. I know you don’t want to talk about 2026 yet, but just higher level, how do you think about balancing those two dynamics to keep time utilization strong into next year? How long do you think it takes to tackle some of these cost inefficiencies? Maybe to that point, do you need to accelerate cold starts in order to tackle the movement or the fleet repositioning costs? It’s a great point, Ken, and one that we’re talking about first off, getting together with our partners, our customers, and fleet planning.

Ted Grace, Chief Financial Officer, United Rentals: Right.

Matt Flannery, President and Chief Executive Officer, United Rentals: A little more accurately. To be fair to them, these big jobs are dynamic and all of a sudden, you know, they need 50 units that we weren’t given a heads up on and they need ASAP. We have a choice to make to give you that example in that instance. First, it starts with me challenging our team in the field. Hey, let’s make sure we’re communicating. The earlier we know, the more efficient we can be. There is a component of are there some categories in our desire to drive high time ute, high fleet productivity? We’ve been running hot for a while, for quite a few years. There are certainly some categories that we’re going hand to mouth again, and we just got to be careful about that. We are going to look at that. There’s a balance between operational efficiency and that capital efficiency.

Both are important. That’s something we’ll look at as we’re going through the planning process. These are all, like I said earlier, individually, when you look at the decisions to ship this stuff through third parties, it’s the right decision mathematically. How can we avoid that incremental cost? How can we minimize it as best we can? That’s something that we’ll have some learnings from this year and we’ll work on it. That’ll all be embedded in our guidance for 2026. I don’t think the dynamic of big projects carrying the ball is going to change a lot in 2026. We’ll see if the local market gets some more growth. Big jobs, we already have that visibility. We know that’s going to be a big part of the opportunity. Right, no, that makes sense.

Ted Grace, Chief Financial Officer, United Rentals: For my follow up.

Matt Flannery, President and Chief Executive Officer, United Rentals: I appreciate all the color around the drags on the fleet repositioning costs. When we think about core profitability, you know, X some of these higher ancillary delivery mix, is there any reason to think that you can’t drive flow through kind of in line with your more normalized type of margins?

Operator: Right.

Matt Flannery, President and Chief Executive Officer, United Rentals: Because you’re kind of signaling a growth year for next year, X some of these more volatile mix impacts, anything to suggest that you can’t kind of get back to that 40%+ type of flow through.

Ted Grace, Chief Financial Officer, United Rentals: Those items. I guess what I’d say is the core profitability of the business we think is performing well. Right. We’ve talked about the impact of delivery this year, which is just a function of serving our customers as efficiently as we can. To Matt’s point, it’s balancing operating efficiency with cost efficiency, or call it capital efficiency with margin. We think we’re doing those things well and we think the underlying business is actually performing as expected in terms of what it looks like going forward. Again, we would expect the core to perform well. A lot of this, and I hate to repeat myself, is being responsive to what customers ask of us and how demand is evolving. When you think about it, that again explains a lot of what we’re doing with ancillary, what we’re doing with cold starts.

I come back to what I just said to Jamie. We feel really good about that core profitability and our goal is always to be as efficient as possible serving demand. That doesn’t change. When you look at kind of what those margins look like, when we talk about updated guidance or whatever, we would say that this is really being responsive to the market itself.

Matt Flannery, President and Chief Executive Officer, United Rentals: Understood, thanks.

Operator: We’ll take our next question from Tami Zakaria with JPMorgan. Please go ahead. Your line is open.

Matt Flannery, President and Chief Executive Officer, United Rentals: Hey, good morning. Thank you so much. I have just one question. Sounds like customer demand has accelerated on the large project side. Is it fair to assume your raised equipment purchase plans would be across general rental and specialty equipment, or are there any specific categories where you’re seeing better demand? I think you raise a good point. Historically, we’ve been putting a lot more growth into specialty and you see that in the results. Think about these large projects taking our full portfolio. The incremental investments would be more broad than maybe our earlier growth expectations of mix. We know where the high time categories are and we’ll continue to make sure that we’re running a good balance of capital, efficiency, and responsiveness in those. I’d say it looks more like our overall portfolio. It’s what these investments look like. Wonderful. Thank you. Thank you, Tami.

Operator: We will take our next question from Sabat Khan with RBC Capital Markets. Please go ahead. Your line is open. Great.

Ted Grace, Chief Financial Officer, United Rentals: Earlier commenter indicated that the larger project.

Matt Flannery, President and Chief Executive Officer, United Rentals: Side of the business is continuing to trend.

Ted Grace, Chief Financial Officer, United Rentals: Some of these really took on.

Matt Flannery, President and Chief Executive Officer, United Rentals: As the IIJ really got going, I guess when you look ahead, one.

Ted Grace, Chief Financial Officer, United Rentals: 2 years, 3 years, do you think?

Matt Flannery, President and Chief Executive Officer, United Rentals: The business or the industry needs some sort of a renewal to that IIJ program, or is the industry just generally.

Ted Grace, Chief Financial Officer, United Rentals: Inflecting toward these larger mega projects?

Matt Flannery, President and Chief Executive Officer, United Rentals: Just some thoughts there.

Operator: Thanks.

Ted Grace, Chief Financial Officer, United Rentals: Yeah, absolutely. Certainly infrastructure broadly has been a very strong market for us and certainly the IIJA has helped support that. Our best sense is there’s still a healthy amount of that initial or that money left, so that should support it. The thing we’ve always talked about, infrastructure, there’s certainly not a lack of demand in the sense of the need to reinvest in infrastructure. We certainly expect that that will continue whether it’s funded by state initiatives or local initiatives or federal dollars. We’ll see ultimately what that funding looks like. There’s no question that the country on the whole needs to continue investing aggressively in reinvigorating infrastructure. The other thing we’ve talked about, just maybe as a corollary to that question, is infrastructure has been a great market for us. It’s an important part of our business.

We’ve got a lot of these tailwinds and certainly we’re riding a lot more than just one wave of infrastructure. When you think about a lot of the onshoring, a lot of the remanufacturing in the U.S. and power and other things in technology, all those come together to give us a really optimistic outlook for the foreseeable future on demand.

Operator: Great.

Matt Flannery, President and Chief Executive Officer, United Rentals: Just as a follow-up, I think there’s been commentary in the.

Ted Grace, Chief Financial Officer, United Rentals: Past that, it may not necessarily be.

Matt Flannery, President and Chief Executive Officer, United Rentals: A larger project, lower margin type of.

Ted Grace, Chief Financial Officer, United Rentals: As you think about larger projects becoming a bigger part of.

Matt Flannery, President and Chief Executive Officer, United Rentals: Your mix, and it sounds like you are.

Ted Grace, Chief Financial Officer, United Rentals: Ramping up that side, you’re moving fleet.

Matt Flannery, President and Chief Executive Officer, United Rentals: Around to meet these large projects, is there sort of an inflection point that.

Ted Grace, Chief Financial Officer, United Rentals: You see in your business at which, look, larger projects are going to be stable at this base, and now we’ll get operating leverage on the sort of.

Matt Flannery, President and Chief Executive Officer, United Rentals: Cost base that will install to perhaps.

Ted Grace, Chief Financial Officer, United Rentals: Meet that demand that the larger customers are looking for.

Matt Flannery, President and Chief Executive Officer, United Rentals: Just any view on how, as that business grows, is there a view on sort of an inflation inflection point on overall margins and operating leverage?

Operator: Thanks.

Matt Flannery, President and Chief Executive Officer, United Rentals: Yeah, it’s a good point. What we’ve talked about historically is when you think about large projects versus our base margins, we have always and still believe, by the way, that although some of those large projects do get some discount as they leverage the bulk spend with us, that we get to serve it more efficiently on site versus spreading that overall. The one area that has changed is as it’s become a bigger part of the portfolio that, quite frankly, we didn’t anticipate was the repositioning of the fleet. It’s a little bit of where the jobs are, where you’re positioned, and what I said earlier, how well you can plan with the customers to position the fleet that’s going to decide that. Just to put it in context, in the relative scheme of things, we’re talking about small numbers, right?

You’re talking about 1% of your operating costs. It does make noise within the metrics, which is why we’re explaining it to you all. Even with this extra burden, transportation costs, it’s still relatively close to the same. The challenge is where the fleet is versus where the need is and how you continue to improve that operating efficiency is what will make that decision. I wouldn’t see it as terribly different even in its current environment with these extra costs, because in the scheme of a $15 billion company and the cost base we have, it’s not a big number. Thanks very much.

Operator: We’ll take our next question from Timothy Thein with Raymond James. Please go ahead. Your line is open.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thank you.

Ted Grace, Chief Financial Officer, United Rentals: Good morning.

Matt Flannery, President and Chief Executive Officer, United Rentals: Just the first question is maybe for you, Matt, just in terms of the customer dialogue and what you’re hearing from in terms of some of the national account customers. You know, it’s been a couple months since we’ve had the tax reform passed, and some of the sentiment readings have kind of been all over the board, but it doesn’t seem to be much change in terms of kind of forward looking CapEx and other, you know, growth plan. I’m just curious, have you detected or seen any change in terms of, again, just kind of thoughts around big project spending now that some time has elapsed since the OBBBA has passed? Our customers remain optimistic and when we look at our customer confidence index, we get that feedback.

When we talk to our national account teams, which are dealing with the largest contractors in North America, we get positive feedback and we’re getting it from the field as they’re asking for more support from a fleet perspective throughout the year. We don’t see any negative trend there at all or any kind of need for a reboot of any kind of spending. The pipeline that we have visibility to looks pretty good for 2026 and the feedback from our customers and our field teams matches that sentiment.

Operator: Okay.

Matt Flannery, President and Chief Executive Officer, United Rentals: Maybe looking a little bit further out, the 2028 goals that you outlined at the investor day back in 2023 obviously wouldn’t have kept it in the slides if you didn’t think it was still, you know, realistic. The elements of it specifically around what, you know, the implied flow through look to be a bit more challenging. Do those targets maybe rely a bit more on M&A from here or maybe just kind of an update as to how we’re tracking towards those again? Go ahead.

Ted Grace, Chief Financial Officer, United Rentals: Yeah, absolutely. Starting with the growth, we feel like we’re tracking well. We talked about this aspirational goal of $20 billion by 2028. I think if you do the simple math, you need to keep compounding at something like 7%. We feel like that is still very much in play. Feel good with that. The margins, frankly, will be more challenging to hit that kind of roughly implied margin and the corollary to flow through. When we look at kind of why, there are a few things that we point to. You mentioned acquisitions. Frankly, acquisitions tend to pull us in the opposite direction to getting there. We’ve long talked about this. Tim, you and I have talked about this and probably Matt and I have talked to the entire investment community about this.

Acquisitions tend to be dilutive to our margins and that’s why we take the time to explain what that margin profile looks like. We really talk about the returns and most specifically those cash on cash returns because that’s how we think about allocating capital. If you look at the acquisitions we’ve done since 2022, they’ve virtually all been dilutive. That doesn’t mean they weren’t good deals. We would say strategically they were all tens, and I’d say financially they’ve all been tens. They’re going to have that dilutive effect. Just to put some numbers around that, I’ve looked at the math. The acquisitions probably account for 70 or 80 basis points of margin dilution since 2022 in isolation. I think if Matt and I could go back in time, we would have done every one of those deals.

Frankly, we probably would have done, we would have loved to do twice as many deals if they had the same financial profile. The margins are also impacted by the ancillary. If you think about that evolution of being responsive to customers and how ancillary has grown from, let’s say, 15% of our rental revenue mix to now approaching the very high teens, that’s probably not something we would have anticipated back then. It’s had this dilutive effect. We’ve talked about it today. We’ve talked about it for a while. Again, these are really beneficial things we’re doing to take care of customers, to frankly use the competitive advantages over incumbents, and they’ve helped support the growth you’ve seen us achieve. We would not go back and do things any differently with ancillary. Certainly, I would just say the broader inflationary environment’s been worse than probably anybody expected since 2022.

That being said, we feel like we’ve managed it really well on an underlying basis. Again, the margins, it’ll be a stretch. I’ll say that I don’t think that surprises anybody. That doesn’t mean we’re not going to keep pushing for it, and it doesn’t mean we’re not incredibly focused on driving better core profitability of the business. Matt, I don’t know if you’d add anything.

Matt Flannery, President and Chief Executive Officer, United Rentals: No, I think Ted’s right. It was an aspirational plan, and I think it was the right one. There have been some dynamics that have changed in the construct of the business, and we’ll keep informing everybody as it goes along. We do feel good about basically the core profitability of the business. Thank you.

Operator: We’ll take our next question from Scott Schneeberger with Oppenheimer. Please go ahead. Your line is open.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thanks very much, guys. A couple from me. First, one is just if you could speak to, I know it’s early and you’re not giving guidance for next year, but your conversations right now, it’s that time of year where you’re speaking with the OEMs on pricing. Looking forward, just with tariffs hovering, what are the conversations like? Is it going to be anticipated as a normal pace of rate increases for the upcoming year, or might there be something that could surprise us? Yes, Scott, as I said before, we try not to share information with our partners and suppliers on open mic, but we feel like we’re in a good position.

The consistency of the scale of spend that we’ve shown to support our partners with, I think it’s valued as much today as it ever has been, specifically in this past year, and we think we’ll be in pretty good shape for purchases in 2026, both from a cost perspective and from a being able to support perspective. Our partners have done a really good job. When you go back a few years ago, when supply chain disruption, getting back to normalized expectations, and we’re very pleased with how they’ve responded. Thanks, Matt. On the theme of the day, just want to ask the question kind of in a different way. If you have a strong demand seasonal uptick next year, which it looks like you are expecting with the elevated level of rerent, ancillary, and large projects and need for probably still delivery, you’re addressing it with some CapEx.

You guys have mentioned on these earlier questions, hey, we’re going to look and see what we can do to improve, but are there some ideas with regard to relationships with transportation providers on the outside, maybe where you can get some bulk prices? Are there operational execution initiatives that you’re looking at? That is one part of this question. The second part of the question is, you haven’t done, obviously H&E stepped away, but haven’t done an acquisition in a while. What is the appetite there? I just heard Ted’s response to Tim’s question, but curious on where that may be applicable on this issue or just general appetite for M&A overall. Thanks.

Operator: Sure.

Matt Flannery, President and Chief Executive Officer, United Rentals: On the outsourcing, we obviously already do a lot of outsourcing and we do have some partnerships within that spend. It is something we look at, whether it’s insourcing or outsourcing more for that flexibility. I think we lean more towards, we seem to do things more efficiently when we can in-source, but that’s a little bit harder when you’re talking about some of these longer hauls. That is something that we’re wrestling with. It’s a great point, something that we’re talking to people about in the space as far as M&A. Listen, we’ve built a great capability throughout our history as good purchasers and good integrators. We do feel one of our mantras is, can we make this business better when we make that decision? We continue to work a pretty robust pipeline. We just haven’t found the right deals yet.

I think we did $20 million of M&A this year. We did one small deal. We don’t predict, forecast, or even plan M&A because I think that’s how people end up doing bad deals. We talk about organic growth and we look at M&A as opportunistic. To be clear, we are always working the pipeline, both in specialty and general rental, and if we find something that fills out our footprint better or a new product that our customers can rely on us for, like we’ve done the last couple of big deals, matting and mobile storage, we’re going to lean in. It’s just a matter of finding that right deal where it meets all three legs of that stool we talk about: cultural, strategic, and most importantly, financial. Thanks. Thanks, Scott.

Operator: There are no further questions on the line. I’ll turn the program back to Matt Flannery for any additional or closing remarks.

Matt Flannery, President and Chief Executive Officer, United Rentals: Thank you, operator. To everyone on the call, appreciate your time. I’m glad you could join us today. Our Q3 investor deck has the latest updates, and as always, Elizabeth is available to answer your questions. Until we speak again in January, I hope you all have a safe and happy holiday season and a happy New Year. We’ll talk soon. Take care, operator. You can now end the call.

Operator: Thank you. This does conclude today’s program. We appreciate your patience and we appreciate your attendance. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.