United Rentals received an investment-rating upgrade Monday to outperform from sector perform from RBC Capital Markets, which said it now has a more constructive view on the equipment-rental company’s stock amid improved expectations for rental rates. The firm boosted its price target on the stock to $138 per share from $128. In comparison, the stock closed Friday at $117.21.
In a note to clients, RBC said its prior rating on the stock of sector perform “had been based in good part on concern over rental-rate pressure related to industry-equipment supply and competition, which we saw dampening URI’s positives, including exposure to US construction and energy [markets], robust free cash…and position to benefit from US policy change, if enacted.” Now, the firm said it sees recent developments as having potential to help minimize its concern. These developments include rental consolidation, with several deals under way or recently closed in the sector, including United Rentals’ April purchase of NES Rentals Holdings II for $965 million in cash.