Rising consumer spending has been benefiting the rental and leasing service industry significantly. Despite the rapid spread of the COVID-19 Delta variant, U.S. consumer confidence hit a 17-month high in July at 129.1 as the demand for manufactured capital goods and business spending on equipment remained high. Barclays economist Pooja Sriram said in a Reuters interview, “The Delta variant does pose some downside risk, although we do not expect it to derail confidence entirely, given that its spread is uneven and largely concentrated in areas with low vaccination rates.”
However, given prevailing inflation rates and dynamic consumer preferences, companies are renting or leasing capital equipment increasingly. The global leasing market is expected to grow 14.4% year-over-year to $1.36 trillion in 2021, and at an 8% CAGR over the next four years to $1.85 trillion in 2025.
Given this backdrop, we believe popular rental and leasing service providers Ryder System, Inc. (R), Rent-A-Center Inc. (RCII), Herc Holdings Inc. (HRI), and Triton International Limited (TRTN) should grow significantly in the near term.
Ryder System, Inc. (R)
Miami-based Ryder System provides commercial fleet management, supply chain, and transportation management solutions to small businesses and large enterprises worldwide. The company also offers full-service leasing, commercial rental and maintenance of vehicles, and integrated services.
On July 26, Bed Bath & Beyond Inc. (BBBY), an omnichannel retailer of domestic merchandise and home furnishings, partnered with R to modernize and reinvent its supply chain and significantly improve merchandise replenishment. R will develop and operate two regional distribution centers to reduce product replenishment times to BBBY and its BuyBuy BABY stores to less than 10 days from its current 35 days, thereby improving the customer experience. R is looking forward to benefiting from this partnership, as BBBY plans to allocate $250 million to capital investments in its reinvention of the supply chain business over the coming years.
R announced the expansion of its Ryder Last Mile, a customizable, multi-tiered delivery solution for big-and-bulky goods on July 22. By establishing footprints in Milwaukee and Philadelphia, R hopes to improve customers’ speed-to-market, which is critical in today’s highly competitive environment.
For its fiscal first quarter, ended March 31, 2021, R’s total revenues increased 2.8% year-over-year to $2.22 billion. The company’s operating revenue came in at $1.82 billion, up 2.6% from the prior-year period. Its non-GAAP net earnings have been reported at $58.19 million, versus a $72.10 million loss in the prior-year period. Its non-GAAP EPS came in at $1.09 for the quarter, compared to a $1.38 loss per share in the year-ago period. As of March 31, the company had $91.74 million in cash and cash equivalents.
A $1.67 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 37.8% year-over-year improvement. It surpassed the Street’s EPS estimate in three of the trailing four quarters. Analysts expect the company’s revenue to increase 6.3% for the current quarter to $2.29 billion.
The stock has gained 72.8% over the past year and 43.7% over the past nine months. It closed yesterday’s trading session at $73.90.
It’s no surprise that R has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has a B grade for Value, Momentum, Growth, and Quality. Click here to see the additional POWR Ratings for R (Stability and Sentiment). R is ranked #2 of 23 stocks in the A-rated Trucking Freight industry.
Rent-A-Center Inc. (RCII)
RCII leases durable household goods to customers on a lease-to-own basis. The Plano, Tex.,company also provides merchandise on an installment sales basis and lease-to-own transaction to consumers who do not qualify for financing from the traditional retailer through kiosks located within the retailer’s locations.
RCII opened a new store in Edmond, Okla., on July 2. With merchandise such as high-quality furniture, appliances, electronics, and computers, RCII hopes to generate good sales this summer.
On April 14, RCII’s virtual lease-to-own (LTO) FinTech company Acima unveiled the industry’s first LTO payments card–Acima LeasePay card. Powered exclusively by the Mastercard network, the LeasePay card enables consumers to enjoy easy-to-use payments with no upfront risk, and lease eligible goods with or without credit at participating Acima merchants. With the card, RCII hopes to gain widespread recognition across the industry in the coming months.
RCII’s total revenues came in at $1.04 billion for its fiscal first quarter ended March 31, 2021, which represents a 47.7% improvement year-over-year. The company’s gross profit increased 21.5% year-over-year to $510.52 million. RCII’s operating profit has been reported at $70.05 million, up 43.3% from the prior-year period. While its non-GAAP net earnings increased 132.4% year-over-year to $87.72 million, its non-GAAP EPS increased 97% year-over-year to $1.32. As of March 31, 2021, RCII had$123.02 million cash and cash equivalents.
Analysts expect the stock’s EPS to improve 39.3%, to $1.45, year-over-year for the current quarter, ending September 30, 2021. The stock surpassed the Street’s EPS estimates in each of the trailing four quarters. The $1.18 billion consensus revenue estimate for the current quarter represents a 65.9% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 5% per annum over the next five years.
RCII has rallied 104.6% over the past year and 77.8% over the past nine months. It ended yesterday’s trading session at $56.09.
RCII’s POWR Ratings reflect this promising outlook. The stock has an A grade for Momentum, and a B grade for Growth and Sentiment.
In addition to the POWR Ratings grades we’ve just highlighted, one can see RCII’s ratings for Value, Stability, and Quality here. Of the 40 stocks in the B-rated Specialty Retailers industry, RCII is ranked #17.
Herc Holdings Inc. (HRI)
Operating as an equipment rental supplier, HRI offers repair, maintenance, and equipment management services and safety training to customers in key markets and provides on-site support and ancillary services. The Estero, Fla.-based company sells its products through its sales team and industry catalogs and participation and sponsorship of industry events, trade shows, and the Internet.
On January 4,HRI acquired Champion Rentals, Inc., a full-service general equipment rental company that serves contractors and industrial, manufacturing, and government customers in Houston. This acquisition expands HRI’s Herc Rentals’ Houston-area presence to 12 physical locations and supports its long-term strategy to achieve greater density and scale in select urban markets across North America.
HRI’s total revenues increased 33.4% year-over-year to $490.90 million for its fiscal second quarter ended June 30, 2021. The company’s pre-tax income has been reported at $61.80 million, up 617% from the prior-year period. HRI’s adjusted net income came in at $47.60 million, representing a 552.1% rise from the prior-year period. Its adjusted EPS increased 528% year-over-year to $1.57. The company had $34.60 million in cash and cash equivalents as of June 30, 2021.
The $2.22 billion consensus revenue estimate for the current quarter, ending September 30, 2021, represents a 64.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The $539.67 million consensus revenue estimate for the current quarter represents an 18.2% rise from the prior-year period. The stock’s EPS is expected to grow at a 42.9% rate per annum over the next five years.
HRI has gained 236.4% over the past year and 176.4% over the past nine months. It closed yesterday’s trading session at $121.04.
HRI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Growth, Momentum, and Quality. To see additional POWR Ratings for HRI’s Value, Stability, and Sentiment, click here.
HRI is ranked #16 of 84 stocks in the B-rated Industrial – Services industry.
Triton International Limited (TRTN)
Based in Bermuda, TRT acquires , leases, and sells various intermodal containers and chassis to shipping lines and freight forwarding companies and manufacturers and provides maritime container management services. The company also purchases containers from shipping line customers and other sellers and resells them to container retailers and users.
On June 2, TRTN’s Triton Container International Limited (TCIL) subsidiary announced its intention to redeem approximately $821 million in outstanding institutional senior secured notes by using borrowings under its term loan facility. It is part of TRTN’s strategy to transition a large portion of its debt capital structure to unsecured investment-grade bonds.
TRTN’s TCIL subsidiary priced an offering of $1.10 billion of senior secured notes on May 26. The net proceeds are expected to be used to repay outstanding borrowings under TCIL’s revolving credit facility, to expand TCIL’s container fleet, and to repay other existing secured debt.
TRTN’s total leasing revenues for its fiscal second quarter ended June 30, 2021, increased 15.1% year-over-year to $369.78 million. The company’s operating income has been reported at $228.56 million, representing a 58.5% year-over-year improvement. While its adjusted net income increased 140.3% year-over-year to $144.20 million, its non-GAAP EPS increased 148.8% year-over-year to $2.14. The company had $77.39 million in cash and cash equivalents as of June 30, 2021.
Analysts expect TRTN’s EPS to improve 93.9% year-over-year, to $2.21, in the current quarter ending September 30, 2021. It surpassed the consensus EPS estimate in each of the trailing four quarters. Analysts’ estimate of its revenue to be $401.30 million for the current quarter, representing a 22.4% year-over-year improvement. The stock’s EPS is expected to grow at a 10% rate per annum over the next five years.
TRTN has gained 41.2% over the past year and 29.4% over the past nine months. It closed yesterday’s trading session at $49.35.
TRTN’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
TRTN has a B grade for Quality, Sentiment, and Momentum. In addition to the POWR Ratings grades we’ve just highlighted, one can see TRTN’s ratings for Growth, Value, and Stability here. Among the 48 stocks in the Shipping industry, TRTN is ranked #3.
Want More Great Investing Ideas?
R shares were trading at $73.64 per share on Wednesday afternoon, down $0.26 (-0.35%). Year-to-date, R has gained 21.10%, versus a 17.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|R||Get Rating||Get Rating||Get Rating|
|RCII||Get Rating||Get Rating||Get Rating|
|HRI||Get Rating||Get Rating||Get Rating|
|TRTN||Get Rating||Get Rating||Get Rating|