United Rentals and Herc Holdings cut at KeyBanc on moderating rental fundamentals By Investing.com

KeyBanc Capital downgraded shares of United Rentals (NYSE:) and Herc Holdings (NYSE:) to Sector Weight from Overweight in a note Monday on moderating rental fundamentals.

Analysts noted plateauing pricing in its proprietary spot rental rate scrapes and downward trends in other 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,'” said 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.

While the firm maintains its view that both URI and HRI are better positioned to participate in mega projects activity vs. their smaller competitors, they think that growth expectations may already be well reflected in out-year multiples.