Stanley Elliott, a Vice President at Stifel, Nicolaus & Co., believes United Rentals, Inc. (URI) has been unfairly punished by talk of a negative impact on the energy side of the company.
“It is a business that has about 50% of its revenues tied to the nonresidential construction cycle,” Elliott says. “[Energy is] about 11% of the overall, and about 6% of those revenues are more upstream related. The risk there or the bear thesis is that energy rich markets will end up spilling over, and it’s more of a contagion, so that that 6% type of a revenue number that many people think is exposed could actually be some multiple of that.”
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Elliott says there are enough projects going on through an improvement on nonresidential, plus a secular shift to the rental channel, that United Rentals should be able to absorb the energy-related headwinds.
“Right now we can’t really tell whether there will be an energy impact or this energy contingent and, if so, how much it will impact numbers,” Elliott said. “I think what is going to happen is you are going a have a push/pull sort of argument for the next fiscal three to six months. And then as we get further into the year, I think the numbers that they can put up will be enough to change opinions, and I think if you get a change in the sentiment you are going to see that change in the stock.”
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