United Rentals, Inc. URI is making bold moves to solidify its position as the leading equipment rental provider with its acquisition of H&E Equipment Services, Inc. HEES. This $4.8 billion deal, which includes $1.4 billion in net debt, is a strategic milestone that will expand United Rentals’ capabilities and footprint across key U.S. markets. The transaction is expected to close in the first quarter of 2025, and its immediate impact on the company’s growth trajectory is already generating buzz.
Shares of United Rentals gained 5.9% during the trading session yesterday following the news release.
This acquisition is not just about adding numbers to the balance sheet. By bringing H&E’s fleet of more than 64,000 units and its network of 160 branches into the fold, United Rentals is enhancing its ability to serve customers with more diversified and comprehensive rental solutions.
Expanding Fleet and Geographical Reach of URI
The integration of H&E’s fleet, valued at $2.9 billion in original cost, with an average age of under 41 months, gives United Rentals a significant competitive advantage. Customers will now have access to a broader range of general and specialty equipment, including aerial work platforms, earthmoving machines, and material handling tools. Additionally, H&E’s branches span more than 30 states, complementing United Rentals’ existing footprint and enhancing its reach in high-demand geographies.
This expanded capacity aligns with United Rentals’ “grow the core” strategy, allowing it to better meet the needs of diverse construction and industrial markets. Importantly, legacy H&E customers will benefit from access to United Rentals’ specialty rental offerings, including trench safety, fluid solutions, power and HVAC, and modular space solutions.
United Rentals’ Financial and Operational Synergies
From a financial perspective, this acquisition makes a strong case. The $4.8 billion purchase price represents a multiple of 6.9x H&E’s trailing 12-month adjusted EBITDA of $696 million, which improves to 5.8x when factoring in $130 million of targeted cost synergies and the net present value of tax attributes estimated at $54 million. These synergies are expected to materialize within 24 months and stem from areas such as corporate overhead, operational efficiencies, and procurement savings. Furthermore, the combined entity anticipates $120 million in annual revenue cross-sell synergies within three years as legacy H&E customers adopt United Rentals’ expanded service offerings.
The acquisition is also projected to be accretive to United Rentals’ adjusted earnings per share and free cash flow generation in its first year post-close. With a pro forma net leverage ratio of approximately 2.3x at closing, United Rentals is well-positioned to maintain financial discipline while pursuing growth opportunities. The company’s goal of achieving a net debt-to-EBITDA ratio of 2.0x within 12 months demonstrates its commitment to maintaining a healthy balance sheet.
URI Driving Growth Through Strategic Factors
Beyond the H&E acquisition, United Rentals continues to benefit from several other growth drivers. The company’s focus on technology adoption, such as telematics and digital platforms, enhances operational efficiency and customer experience. Additionally, its investments in specialty rental solutions cater to niche markets, driving higher margins and customer loyalty.
United Rentals also stands to gain from favorable macroeconomic trends, including robust construction activity and increased infrastructure spending. As government initiatives like the Infrastructure Investment and Jobs Act fuel demand for large-scale projects, United Rentals is well-positioned to capitalize on these opportunities with its expanded fleet and enhanced capabilities.
URI’s Share Price Performance
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URI shares have gained 30.1% over the past year, outperforming the Zacks Building Products - Miscellaneous industry’s 15.2% rise. United Rentals’ acquisition of H&E Rentals is a transformative move that reinforces its leadership position in the equipment rental industry. By expanding its fleet, geographical reach, and service offerings, the company is better equipped to meet the evolving needs of its customers while driving long-term shareholder value. Combined with its ongoing focus on operational excellence and strategic growth initiatives, United Rentals is poised for sustained success in a competitive market.
URI’s Zacks Rank
Currently, URI carries a Zacks Rank #3 (Hold).
Key Picks
A couple of better-ranked stocks from the Construction sector have been discussed below:
MasTec, Inc. MTZ currently sports a Zacks Rank #1 (Strong Buy). MTZ delivered a trailing four-quarter earnings surprise of 40.2%, on average. The stock has jumped 109.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MTZ’s 2025 sales and earnings per share (EPS) calls for an increase of 8.8% and 43.4%, respectively, from a year ago.
Weyerhaeuser Company WY currently sports a Zacks Rank of 1. WY delivered a trailing four-quarter earnings surprise of 41.6%, on average. The stock has lost 13.9% in the past year.
The consensus estimate for WY’s 2025 sales and EPS indicates an increase of 8% and 71.3%, respectively, from a year ago.
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