United Rentals' Q3 2025: Contradictions Emerge on CapEx Strategy, Specialty Segment Margins, and Local Market Guidance

Date of Call: October 23, 2025

Financials Results

• Revenue: $4.2B total revenue, up 5.9% YOY; rental revenue $3.67B, up 5.8% YOY (third-quarter records)
• EPS: $11.70 adjusted EPS (third quarter)

Guidance:

• Total revenue guidance narrowed to $16.0B–$16.2B (midpoint ~5% growth; ~6% ex-used at midpoint)
• Used sales guidance unchanged at ~ $1.45B
• Gross rental CapEx raised to $4.0B–$4.2B (up $300M at midpoint)
• Adjusted EBITDA guidance narrowed to $7.325B–$7.425B (midpoint $7.375B)
• Cash from operations midpoint reaffirmed at $5.2B; free cash flow guided to $2.1B–$2.3B
• Intend to repurchase $1.9B of shares and return nearly $2.4B to shareholders

Business Commentary:

• Revenue and Demand Growth:
• United Rentals reported total revenue of $4.2 billion for Q3, up 5.9% year-over-year, with rental revenue reaching $3.7 billion, up 5.8%.

• The growth was driven by strong demand across both General Rental and Specialty businesses, with optimism from field feedback and a healthy customer confidence index.

• Specialty Segment Performance:

• The Specialty segment posted double-digit increases in rental revenue, driven by growth across all product offerings and 18 new cold starts in Q3.

• This growth is attributed to competitive differentiation and cross-selling opportunities, with the company focusing on filling out its specialty footprint.

• CapEx and Fleet Investment:

• United Rentals spent nearly $1.5 billion on CapEx in Q3 and expects to spend over $4 billion on fleet for the year to capitalize on strong demand and anticipated growth in 2026.

• This reflects acceleration to meet ongoing demand from large projects and strategic investments to enhance its business model.

• Profitability and Margin Impact:

• Adjusted EBITDA increased to a third-quarter record of over $1.9 billion, with a margin of 46%, although there were challenges managing costs like delivery expenses and fleet repositioning costs.
• These cost pressures were a result of meeting customer demand efficiently, including the use of third-party outside haul services during the seasonal peak.

Sentiment Analysis:

Overall Tone: Positive

• Management: "record revenue and adjusted EBITDA" and "the year is playing out better than we originally expected." CFO: raised CapEx and increased/narrowed revenue and EBITDA guidance; CEO: "I expect this momentum to carry into 2026."

Contradiction Point 1

Capital Expenditure (CapEx) Strategy

It involves changes in the company's capital expenditure strategy, which directly impacts financial planning and resource allocation.

Is the increased capital expenditure shifting demand from 2026 and impacting 2026 CapEx plans? - David Raso (Evercore ISI)

2025Q3: Accelerated CapEx in Q3 was to meet current demand, not a pull forward from 2026. 2026 is expected to be a growth year, supporting this expectation. CapEx cadence for 2026 will reflect replacement needs and additional growth. - Matthew Flannery(CEO)

How should we estimate the revenue contribution from Q3/Q4 deals in 2025 once annualized? - Timothy Thein (Raymond James & Associates, Inc.)

2024Q4: We are expecting to grow CapEx by about 10% year-over-year, reflecting higher depreciation expense, particularly related to new Yak and General Finance assets, as well as infrastructure investments. - William Grace(CFO)

Contradiction Point 2

Specialty Segment Growth and Margins

It involves the company's expectations regarding the growth and profitability of its specialty segment, which impacts strategic decision-making and investor expectations.

How does the large project focus affect specialty margins versus prior quarters? - Steven Fisher (UBS Investment Bank)

2025Q3: Specialty's margin decline in Q3 was due to a 20% increase in depreciation costs, primarily from Yak assets, and additional delivery costs. - William Grace(CFO)

How are fleet repositioning and specialty mix affecting margins? - Rob Wertheimer (Melius)

2025Q1: Specialty mix contributed to basis point decline in margins. Higher subcontractor labor and fuel services also impacted, but the overall impact of specialty on EBITDA is positive. - William Grace(CFO)

Contradiction Point 3

Local Market Demand and Impact on Guidance

It involves the company's expectations regarding local market demand, which affects revenue projections and guidance.

Does the 2026 growth include local markets? How might rate cuts impact local market demand? - Michael Feniger (BofA Securities)

2025Q3: Local markets are expected to remain flat. Rate cuts may improve sentiment, but timing and impact are uncertain. We'll reassess as we finish planning for 2026. - Matthew Flannery(CEO)

How are smaller local accounts affecting guidance? - Ken Newman (KeyBanc Capital Markets)

2025Q1: We have visibility through our local market forecasting mechanism and expect to stay within guidance ranges. Local accounts contribute less to our overall business, lessening any potential impact. - Matthew Flannery(CEO)

Contradiction Point 4

Specialty Segment Organic Growth and Demand

It highlights a shift in expectations regarding the growth and demand in the specialty segment, which is a significant part of the company's revenue.

How did the large project focus affect specialty margins versus prior quarters? - Steven Fisher (UBS Investment Bank)

2025Q3: Specialty's margin decline in Q3 was due to a 20% increase in depreciation costs, primarily from Yak assets, and additional delivery costs. Ancillary growth remains positive, with no major changes in cost dynamics. - William Grace(CFO)

What was the organic growth in specialty for the quarter? What were the differences between specialty business lines? - Clay Williams (Goldman Sachs)

2024Q4: Specialty growth is strong across all business lines, with specific growth in newer products like Yak and General Finance, and continued growth in power. The company plans to add more cold-starts to support growth. - Matthew Flannery(CEO)

Q&A:

• Question from David Raso (Evercore ISI): Is the Q3 accelerated CapEx a pull-forward from 2026 and can you comment on ancillary pricing and fleet productivity components?
  Response: Not a pull-forward — Q3 CapEx was accelerated to meet current demand/large-project wins; ancillary growth is largely delivery (low-margin pass-through) and fleet productivity shows rate and time up with mix variability driving quarter-to-quarter differences.

• Question from Robert Wertheimer (Melius Research LLC): What in-field indicators are driving demand (mega projects vs local share gains) and will fleet repositioning costs subside?
  Response: Demand is primarily driven by large/mega projects (local markets are generally flat); fleet repositioning and mobilization costs are an ongoing dynamic tied to those projects, not a one-time event.

• Question from Michael Feniger (BofA Securities): Is the 2026 growth call inclusive of local markets or mainly large projects; and how big is the power vertical today?
  Response: Local markets are currently flat and the near-term growth thesis is driven by large projects; the power vertical is now low-double-digits (~11%–12% of revenue).

• Question from Steven Fisher (UBS): What explains the specialty margin headwind increase (220bps to 490bps) and will cold-start momentum continue?
  Response: About 200bps of the 490bps specialty headwind was higher depreciation from accelerated YAK investments; the remainder is delivery/ancillary effects; a small number (~10–12) of additional cold starts possible in Q4, '26 plans pending.

• Question from Jamie Cook (Truist Securities): With ancillary growing and inflationary pressures, can you push through higher rental rates to offset margin headwinds?
  Response: Ancillary is dilutive but strategic to win share; management is actively managing costs and will finalize pricing/plan decisions in the upcoming planning process.

• Question from Kenneth Newman (KeyBanc Capital Markets): How do you balance growing fleet to meet demand vs. reducing fleet-repositioning costs and do you need more cold starts to address this?
  Response: Management is balancing capital efficiency and operational efficiency by improving early communication with customers and will address repositioning cost trade-offs in the 2026 planning process.

• Question from Tami Zakaria (JPMorgan): Is the raised equipment purchase plan focused on Specialty or across the portfolio?
  Response: Incremental purchases are broad-based across the overall portfolio, not limited to Specialty.

• Question from Sabahat Khan (RBC Capital Markets): Does the business rely on continued IIJA-like funding and will bigger projects eventually drive operating leverage?
  Response: Infrastructure tailwinds remain healthy with funding runway; larger projects drive demand but introduce repositioning costs — the impact is small in the overall cost base and operating leverage depends on planning/positioning efficiency.

• Question from Timothy Thein (Raymond James): Any customer CapEx change post-tax reform and are the 2028 $20B/flow-through goals still realistic or reliant on M&A?
  Response: Customers remain optimistic; the $20B by 2028 growth target is still considered achievable but implied margins/flow-through will be challenging—M&A to date has been dilutive (~70–80bps since 2022) and any deals are opportunistic.

• Question from Scott Schneeberger (Oppenheimer & Co.): What are OEM pricing discussions and can you address outsourcing/transportation initiatives and M&A appetite?
  Response: Supplier relationships are strong and purchasing is in good shape; the company is evaluating insourcing vs. outsourcing transportation to reduce costs and maintains an opportunistic M&A pipeline but has made only small acquisitions this year.