Competition in Rental Industry Could Drive Down Prices

According to a UBS Investment Research survey released last week, branch managers at Greenwich, Conn.-based United Rentals, Inc., said competition in the equipment rental industry could drive down prices.

For the UBS study, analyst David A Bleustein surveyed 116 United Rentals branch managers and asked whether conditions were improving or deteriorating, and whether prices were rising or falling. Although 57 percent of respondents said conditions were better in May 2006 than in May 2005, Bleustein said the surveys have shown a trend of gradual deceleration over the past few months.

In the survey, managers' comments alluded to a slowdown in construction and stingier price comparisons among customers. "Competition dragging rates down as usual" and "More rate pressure expected through summer as some of the competition will continue to go lower" were a few of the excerpted comments from managers about the current competitive environment.

Although Bleustein's reports the conditions in the equipment rental industry are still solid, and he maintained a Buy rating on UR's shares, he lowered his price target from $45 to $43. The price target maintains the company's traditional 5% premium to the industry, but the market is now assigning lower multiples to equipment rental companies, Bleustein said.

Source: Yahoo! Finance