# United Rentals (URI) Financial Model Free Excel 3-statement financial model and company analysis for United Rentals. - Canonical: https://finamodel.com/companies/united-rentals - Industry: Industrial Equipment - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/URI.xlsx ## Model Purpose This model projects the fleet dynamics, cash flow generation, and capital allocation of United Rentals to determine its equity valuation and assess its capacity for continued debt-funded M&A and share repurchases. ## Company Overview United Rentals is the largest equipment rental company in the world, providing a comprehensive range of equipment to construction and industrial customers, utilities, and municipalities. The company operates a highly asset-heavy business model, purchasing equipment from manufacturers and renting it out over its useful life before selling it in the used equipment market. The business is divided into two primary reporting segments: General Rentals (approximately 69% of revenue) and Specialty Rentals (approximately 31% of revenue). Geographically, the company is heavily concentrated in North America, which accounts for the vast majority of its revenue, alongside a minor presence in Europe, Australia, and New Zealand. United Rentals holds an estimated 15% market share in North America and benefits from significant scale advantages in fleet procurement and branch network density. The company is a serial acquirer, having recently completed the transformational acquisition of Yak Access in early 2024 and Ahern Rentals in late 2022, which significantly expanded its specialty and general fleet capabilities. ## Revenue Deep Dive ### Equipment Rentals - **Segment name**: Equipment Rentals (further split into General Rentals and Specialty Rentals in the footnotes). - **Revenue driver formula**: Average Original Equipment Cost (OEC) x Fleet Productivity. - **Historical growth rate**: 5% to 15% CAGR, heavily influenced by recent acquisitions. - **Key growth levers and headwinds**: Non-residential construction starts, infrastructure spending bills, industrial manufacturing activity, and the secular shift from owning to renting equipment. - **Pricing dynamics**: Spot pricing for short-term rentals and negotiated contractual rates for national accounts; highly sensitive to local market fleet supply and demand. - **Revenue recognition notes**: Recognised over the period the equipment is rented. - **Seasonality**: The third and fourth quarters are typically the strongest due to peak construction activity in North America, while the first quarter is the weakest due to winter weather. ### Sales of Rental Equipment - **Segment name**: Sales of Rental Equipment. - **Revenue driver formula**: Original Cost of Equipment Sold x (1 + Used Equipment Premium/Discount). - **Historical growth rate**: Highly variable depending on the fleet replacement cycle and used equipment market pricing. - **Key growth levers and headwinds**: Used equipment market pricing, supply chain constraints for new equipment (which drives up used prices), and the company's internal fleet age targets. - **Pricing dynamics**: Market-driven spot pricing through retail, auction, and wholesale channels. - **Revenue recognition notes**: Recognised at the point of sale when control transfers to the buyer. - **Seasonality**: Generally heavier in the fourth quarter as the company defleets after the peak construction season. ### Sales of New Equipment - **Segment name**: Sales of New Equipment. - **Revenue driver formula**: Volume of New Units Sold x Average Selling Price. - **Historical growth rate**: 2% to 5% CAGR (a minor revenue stream). - **Key growth levers and headwinds**: Customer preference for ownership over rental for specific niche items. - **Pricing dynamics**: Cost-plus pricing based on manufacturer wholesale rates. - **Revenue recognition notes**: Recognised at the point of sale. - **Seasonality**: Mirrors general construction seasonality. ### Independent Contractor Supplies - **Segment name**: Independent Contractor Supplies. - **Revenue driver formula**: Branch Footprint x Supplies Revenue per Branch. - **Historical growth rate**: 3% to 6% CAGR. - **Key growth levers and headwinds**: Attach rates to equipment rentals (e.g. selling safety gear and hand tools alongside heavy machinery). - **Pricing dynamics**: Retail pricing with standard retail margins. - **Revenue recognition notes**: Recognised at the point of sale. - **Seasonality**: Correlates directly with equipment rental volumes. ### Service and Other Revenues - **Segment name**: Service and Other Revenues. - **Revenue driver formula**: Equipment Rental Revenue x Service Attachment Rate. - **Historical growth rate**: 4% to 7% CAGR. - **Key growth levers and headwinds**: Customer demand for repair services on customer-owned equipment and delivery fees. - **Pricing dynamics**: Hourly labour rates and standard parts pricing. - **Revenue recognition notes**: Recognised as services are performed. - **Seasonality**: Correlates with general construction activity. ## Cost Structure ### Variable Costs / COGS - **Cost of Equipment Rentals, excluding depreciation**: Includes direct operating expenses such as delivery costs, maintenance and repair, facility costs, and branch personnel salaries. - **Depreciation of Rental Equipment**: The largest single expense, representing the systematic allocation of the fleet's original cost over its useful life. - **Cost of Sales (Rental Equipment, New Equipment, Contractor Supplies)**: The net book value of used equipment sold, plus the wholesale cost of new equipment and supplies. - **Gross margin range**: Rental gross margin (excluding depreciation) typically ranges from 36% to 41%. General Rentals runs lower (around 36% to 38%), while Specialty Rentals runs higher (around 40% to 45%). ### Operating Expenses - **R&D**: Not material for this company. - **SG&A**: Primarily consists of sales force compensation, corporate overhead, IT costs, and marketing. It is largely headcount-driven and scales with the branch network. - **Non-rental Depreciation & Amortisation**: Relates to non-rental property, leasehold improvements, and amortisation of intangible assets from acquisitions. - **Stock-Based Compensation**: Typically runs at 0.5% to 1.0% of revenue. - **Restructuring / one-time charges**: Frequent due to the company's serial acquisition strategy, typically involving branch consolidation and severance costs. ### Margin Profile - **Gross margin**: GAAP gross margin typically ranges from 38% to 42%. - **EBITDA margin**: Adjusted EBITDA margin is exceptionally high, ranging from 45% to 47%, reflecting the asset-heavy nature of the business where depreciation is added back. - **Operating margin**: Typically ranges from 24% to 27%. - **Net margin**: Typically ranges from 14% to 17% (15.5% in FY2025). - **Margin trend**: Margins have faced slight compression recently due to inflationary pressures on delivery and maintenance costs, alongside higher depreciation expenses from the Yak Access acquisition. ## Balance Sheet Structure - **Total assets**: Approximately $35 billion to $40 billion. - **Key asset categories**: Rental Equipment (net of accumulated depreciation) is the dominant asset, representing the core revenue-generating fleet. - **Goodwill & intangibles**: Highly material (often exceeding 25% of total assets) due to the historical roll-up strategy and major acquisitions like Yak Access and Ahern Rentals. - **Working capital profile**: - **Days Sales Outstanding (DSO)**: Typically 45 to 55 days. - **Days Inventory Outstanding (DIO)**: Not a primary metric for the rental fleet, but applies to the small contractor supplies inventory (typically 30 to 40 days). - **Days Payable Outstanding (DPO)**: Typically 40 to 50 days. - **Net working capital as % of revenue**: Generally low or slightly negative, as the business is not inventory-intensive in the traditional retail sense. - **Funding growth**: The company funds growth through massive capital expenditures rather than working capital investments. - **PP&E**: Non-rental property and equipment is relatively small, consisting of branch facilities, delivery vehicles, and IT hardware. - **Right-of-use assets**: Material, as the company leases the vast majority of its branch locations rather than owning the real estate. ## Capital Expenditure & Investment - **Capex as % of revenue**: Gross rental capital expenditures typically run between 20% and 26% of revenue ($4.189 billion in FY2025). - **Maintenance capex vs. growth capex**: Approximately 50% to 60% is maintenance (replacing sold or retired fleet) and 40% to 50% is growth (expanding the fleet to meet demand or enter new markets). - **Major capex programmes**: Continuous fleet refresh cycle to maintain an optimal fleet age (typically targeting around 50 to 55 months average age). - **Capitalised software**: Minor relative to fleet capex. - **M&A pattern**: A mix of continuous bolt-on acquisitions to increase local density and occasional transformational acquisitions to expand specialty capabilities. - **Typical acquisition multiple paid**: Historically 6.0x to 8.0x post-synergy EBITDA. ## Debt & Capital Structure - **Total debt**: Approximately $14.2 billion. - **Debt/EBITDA ratio**: The company targets a net leverage ratio of 1.5x to 2.0x (reported at 1.9x at the end of FY2025). - **Credit rating**: Investment grade (typically BBB- or equivalent). - **Key debt instruments**: A large Asset-Based Lending (ABL) revolving credit facility, senior secured term loans, and various tranches of senior unsecured notes. - **Maturity profile**: Well-laddered with average maturities typically exceeding 5 years. - **Interest rate profile**: A mix of fixed-rate bonds and floating-rate bank debt, with a weighted average cost of debt around 5% to 6%. - **Covenants**: Standard fixed charge coverage ratios and borrowing base availability limits on the ABL facility. - **Share repurchase programme**: Highly active. The company repurchased $1.9 billion in FY2025 and announced a new $5 billion programme with $1.5 billion targeted for FY2026. - **Dividend policy**: The company pays a regular quarterly dividend. Total dividends paid in FY2025 were $464 million, with a 10% increase announced for FY2026. ## Cash Flow Characteristics - **Operating cash flow conversion**: Very strong, with OCF typically exceeding 2.0x Net Income ($5.19 billion OCF vs $2.6 billion Net Income in FY2025). - **Free cash flow margin**: Typically 12% to 15% of revenue ($2.18 billion FCF in FY2025). - **Major non-cash items**: Depreciation of rental equipment is the largest bridge between net income and operating cash flow, often exceeding $2.5 billion annually. - **Working capital cash flow impact**: Generally a minor source or use of cash compared to the sheer scale of depreciation and capex. - **Capex intensity**: Extremely high. The business requires constant reinvestment in heavy machinery to maintain revenue generation. - **Cash tax rate vs. GAAP effective tax rate**: Cash taxes are often lower than GAAP taxes due to accelerated depreciation benefits on equipment purchases (bonus depreciation rules). ## Sheet Structure 1. **Assumptions**: Hardcoded drivers for macroeconomic inputs, segment growth, fleet productivity, margin targets, and capital allocation policies. 2. **Fleet Roll-Forward**: Tracks Original Equipment Cost (OEC) for both General and Specialty segments. Calculates beginning OEC, purchases, sales, and ending OEC. 3. **Revenue Schedule**: Calculates Equipment Rentals based on average OEC and fleet productivity, plus secondary revenue streams (Sales of Rental Equipment, New Equipment, Supplies, Service). 4. **Income Statement**: Mirrors the 10-K layout. Splits Cost of Revenues into Cost of Equipment Rentals (excluding depreciation), Depreciation of Rental Equipment, and Cost of Sales. 5. **Balance Sheet**: Highlights Rental Equipment (net) and Goodwill as primary assets. Tracks debt tranches and equity. 6. **Cash Flow Statement**: Starts with Net Income, adds back massive rental depreciation, adjusts for working capital, and deducts gross rental capex to arrive at Free Cash Flow. 7. **Debt & Interest Schedule**: Models the ABL facility, term loans, and senior notes. Calculates interest expense and tracks the net leverage ratio covenant. 8. **Working Capital & Depreciation**: Schedules out the depreciation of the rental fleet based on average OEC and non-rental depreciation. 9. **DCF Valuation**: Unlevered free cash flow calculation, WACC build-up, and terminal value based on an EV/EBITDA exit multiple. ## Key Financial Relationships 1. **Average OEC** = (Beginning OEC + Ending OEC) / 2 2. **Ending OEC** = Beginning OEC + Gross Rental Capital Expenditures - Original Cost of Equipment Sold 3. **General Rentals Revenue** = Average General Rentals OEC x General Rentals Fleet Productivity Yield 4. **Specialty Rentals Revenue** = Average Specialty Rentals OEC x Specialty Rentals Fleet Productivity Yield 5. **Sales of Rental Equipment Revenue** = Original Cost of Equipment Sold x (1 + Used Equipment Margin) 6. **Cost of Equipment Rentals (excl. depreciation)** = Equipment Rentals Revenue x (1 - Rental Gross Margin percentage) 7. **Depreciation of Rental Equipment** = Average OEC x Blended Fleet Depreciation Rate 8. **Adjusted EBITDA** = Net Income + Provision for Income Taxes + Interest Expense + Depreciation of Rental Equipment + Non-Rental Depreciation & Amortisation + Non-Cash Stock Compensation 9. **Net Leverage Ratio** = (Total Debt - Cash and Cash Equivalents) / Adjusted EBITDA 10. **Free Cash Flow** = Net Cash Provided by Operating Activities - Purchases of Rental Equipment + Proceeds from Sales of Rental Equipment - Non-Rental Capital Expenditures ## Cross-Sheet Dependencies - The **Fleet Roll-Forward** sheet is the critical engine of the model. It feeds Average OEC into the **Revenue Schedule** to calculate top-line growth. - The **Fleet Roll-Forward** also feeds Average OEC into the **Working Capital & Depreciation** sheet to calculate the massive Depreciation of Rental Equipment line item. - The **Working Capital & Depreciation** sheet feeds depreciation expense into the **Income Statement** and as a non-cash add-back in the **Cash Flow Statement**. - The **Cash Flow Statement** determines the cash available for share repurchases and debt paydown, which feeds the **Debt & Interest Schedule**. - The **Debt & Interest Schedule** calculates interest expense, which feeds back into the **Income Statement**, creating a circular reference that must be managed with a toggle switch. ## Sign Convention - **Revenues**: Positive. - **Expenses**: Positive on the Income Statement schedules, but subtracted in subtotal formulas (e.g. Gross Profit = Revenue - Cost of Revenue). - **Assets**: Positive. - **Liabilities & Equity**: Positive. - **Cash Flow Statement**: Cash inflows (e.g. Net Income, Depreciation, Proceeds from Sales) are positive. Cash outflows (e.g. Capital Expenditures, Dividends Paid, Share Repurchases) are negative. ## Things Most Likely to Go Wrong - **Confusing OEC with Net Book Value**: Revenue is driven by Original Equipment Cost (OEC), not the depreciated net book value of the fleet. The model must track OEC separately from the balance sheet asset value. - **Misunderstanding Cost of Equipment Rentals**: This line item explicitly excludes depreciation in the company's reporting. If a builder includes depreciation in the gross margin calculation for this specific line, margins will be drastically understated. - **Ignoring the Yak Access and Ahern M&A impact**: Historical growth rates in 2023 and 2024 are heavily inflated by these acquisitions. Using a simple historical average will wildly overstate organic growth projections. - **Disconnect between Capex and Revenue**: If the model projects high revenue growth but low gross rental capex, the fleet productivity yield will mathematically break reality. Growth requires buying fleet. - **Used Equipment Margin Volatility**: Assuming the high used equipment margins of 2022 and 2023 will persist indefinitely is dangerous. The model must normalise used equipment margins as supply chains recover. - **Depreciation Rate Shifts**: The Yak Access acquisition brought in assets with different useful lives, which shifted the blended depreciation rate. The model must account for this higher depreciation burden in the Specialty segment. - **Cash Tax vs GAAP Tax**: Failing to model the cash tax benefits of accelerated depreciation on fleet purchases will result in understated operating cash flow. - **EBITDA Definition**: Adjusted EBITDA for United Rentals includes the add-back of stock-based compensation and restructuring charges. The model must clearly bridge GAAP Operating Income to Adjusted EBITDA. ## Validation Checks - "Adjusted EBITDA margin should remain in the 45% to 47% range; flag if it deviates outside this band." - "Net Leverage Ratio must stay between 1.5x and 2.0x to align with management's stated target capital structure." - "Operating Cash Flow should consistently exceed 2.0x Net Income due to the heavy depreciation add-back." - "Gross Rental Capital Expenditures should roughly equal 20% to 25% of total revenue to maintain fleet age and support moderate growth." - "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." - "Free Cash Flow margin should remain between 12% and 15% of total revenue." - "The implied average fleet age should not exceed 60 months; if it does, the model is under-investing in maintenance capex." - "Dividend payout ratio should remain below 25% of Net Income, leaving ample room for the $1.5 billion annual share repurchase programme." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | General Rentals OEC Growth | 3.5 | % | Reflects normalised organic growth post-Ahern integration. | | Specialty Rentals OEC Growth | 8.0 | % | Reflects higher structural growth and cross-selling post-Yak acquisition. | | Fleet Productivity Yield | 44.5 | % | Based on historical averages of revenue generated per dollar of OEC. | | General Rentals Gross Margin (excl. depr) | 36.5 | % | Aligns with FY2025 reported segment margins. | | Specialty Rentals Gross Margin (excl. depr) | 40.5 | % | Aligns with FY2025 reported segment margins, reflecting higher-margin ancillary services. | | Used Equipment Sales Margin | 45.0 | % | Normalised margin as supply chain constraints ease from peak 2023 levels. | | Rental Fleet Depreciation Rate | 14.5 | % of Avg OEC | Blended rate reflecting standard useful lives and recent specialty fleet additions. | | SG&A as % of Total Revenue | 11.0 | % | Consistent with historical operating leverage and branch network scale. | | Effective Tax Rate | 24.5 | % | Based on the blended US and Canadian statutory rates plus state taxes. | | Gross Rental Capex as % of Revenue | 24.0 | % | Required to maintain fleet age and support projected OEC growth. | | Target Net Leverage Ratio | 1.9 | x | Aligns with management's stated target and FY2025 actuals. | | Annual Share Repurchases | 1,500 | $ Millions | Matches management's explicit guidance for FY2026 under the new $5B programme. | | Dividend Growth Rate | 10.0 | % | Matches the board-approved increase announced in January 2026. | | WACC | 8.5 | % | Reflects the company's cost of debt and equity risk premium for an industrial cyclical. | | Terminal EV/EBITDA Multiple | 6.5 | x | Aligns with historical trading multiples for asset-heavy rental businesses. | ## Data Sources & Benchmarks - **Filings**: SEC EDGAR (Form 10-K, 10-Q, 8-K) and the United Rentals Investor Relations website for quarterly earnings presentations. - **Key Peers**: Ashtead Group plc (Sunbelt Rentals - LSE: AHT), Herc Holdings Inc. (HRI), and H&E Equipment Services (HEES). - **Industry Data**: American Rental Association (ARA) forecasts, Dodge Construction Network for non-residential construction starts, and the Architecture Billings Index (ABI). - **Consensus Estimates**: FactSet or Bloomberg for forward-looking revenue and EBITDA consensus to validate model outputs. ## Sources - United Rentals, Inc. Form 10-K for the fiscal year ended December 31, 2025. - United Rentals Fourth Quarter and Full-Year 2025 Results Press Release (January 28, 2026). - United Rentals Fourth Quarter 2025 Investor Presentation (January 28, 2026). - HDIN Research: United Rentals 2025 Financial Analysis (February 12, 2026). --- ## Frequently asked questions ### What does United Rentals do? United Rentals is the largest equipment rental company globally, providing a comprehensive range of equipment to construction, industrial, utility, and municipal customers. The company operates an asset-heavy business model, purchasing equipment to rent out over its useful life before selling it in the used equipment market. ### How does United Rentals generate its revenue? United Rentals generates revenue primarily through its two reporting segments: General Rentals, which accounts for approximately 69% of revenue, and Specialty Rentals, making up about 31%. The company rents out a wide range of equipment, mainly concentrated in North America, with a minor presence in Europe, Australia, and New Zealand. ### What are the key capital expenditure assumptions in a United Rentals financial model? Gross rental capital expenditures for United Rentals typically run between 20% and 26% of revenue, with approximately 50% to 60% allocated to maintenance capex and 40% to 50% for growth capex. The model assumes a continuous fleet refresh cycle to maintain an optimal average fleet age, targeting around 50 to 55 months. ### What is United Rentals' strategy for growth and expansion? United Rentals pursues growth through a mix of continuous bolt-on acquisitions to increase local density and occasional transformational acquisitions to expand specialty capabilities, such as the recent acquisitions of Yak Access and Ahern Rentals. The company also funds growth through massive capital expenditures to expand its rental fleet. ### What are the primary assumptions for United Rentals' operating expenses in a financial model? Key operating expense assumptions in the model include COGS at 95% of revenue, SG&A at approximately 51.23% of revenue, and Depreciation & Amortization at about 16.58% of revenue. The model also incorporates a tax rate of approximately 23.72%. ### Is a financial model for United Rentals available for download? Yes, a downloadable Excel financial model for United Rentals (URI) is available. This model projects the company's fleet dynamics, cash flow generation, and capital allocation to determine its equity valuation and assess its capacity for continued debt-funded M&A and share repurchases. [Interactive forecast calculator](https://finamodel.com/companies/united-rentals/forecast)