© Reuters. United Leases (URI) and Herc Holdings (HRI) reduce at KeyBanc on moderating rental fundamentals
KeyBanc Capital downgraded shares of United Leases (NYSE:) and Herc Holdings (NYSE:) to Sector Weight from Obese in a word Monday on moderating rental fundamentals.
Analysts famous plateauing pricing in its proprietary spot rental price scrapes and downward developments in different forward-looking nonresidential indicators.
“To be clear, we maintain that the combination of secular reshoring trends and federal stimulus should support our industry thesis of the ‘big getting bigger at a faster pace,'” stated the analysts. “We think that has been clearly reflected in revenue and EBITDA having grown at DD CAGRs for both companies since 2021.”
“Although larger nonresidential construction starts tracked by our Breaking Ground dataset have demonstrated impressive resilience through 2023 against extremely tough prior-year comps, we think it could be difficult to maintain that positive trend into 2024, particularly as forward-looking nonresidential indicators have begun to show sharp decelerations in recent months,” they added.
Whereas the agency maintains its view that each URI and HRI are higher positioned to take part in mega initiatives exercise vs. their smaller rivals, they assume that progress expectations could already be properly mirrored in out-year multiples.
