United Rentals EPS climbs 10% as data centers drive rentals
United Rentals is translating the artificial intelligence infrastructure boom into tangible earnings growth, even as hedge funds reduce their exposure to the equipment rental giant.
United Rentals posted 10% earnings per share growth in the second quarter as equipment rental sales accelerated to 9%. The Stamford, Connecticut-based company stabilized its adjusted margins during the period. This performance solidified United Rentals as a top contributor for Wedgewood Partners in the quarter, joining the ranks of Alphabet, Apple, and Taiwan Semiconductor Manufacturing.
The primary catalyst for this acceleration is the physical build-out of artificial intelligence infrastructure. "This acceleration was driven by strong nonresidential construction end markets, particularly data centers and power projects, and by continued growth in megaprojects," Wedgewood noted in its second-quarter investor update. This demonstrates how AI-related capital expenditure is cascading into industrial sectors.
This tangible infrastructure spending offers a counter-narrative to the broader market's momentum-driven tech rally. Wedgewood's composite fund returned a net 9.4% for the quarter, significantly lagging the S&P 500's 15.2% gain and the Russell 1000 Growth Index's 16.7% return. Over the past 15 months, the firm's high-quality stock picks have returned just 25%, overshadowed by the 90% surge in the S&P 500 Momentum ETF.
To navigate this environment, Wedgewood has increased its allocations to hyperscalers and technology hardware, recognizing their crucial role in AI adoption. However, the firm explicitly cautioned against the cyclical risks and volatility inherent to semiconductor stocks. United Rentals effectively bridges this gap for the fund, offering leverage to AI capital expenditure without the direct silicon exposure.
Despite these strong fundamentals, broader hedge fund sentiment toward the equipment rental sector appears to be cooling. At the end of the first quarter, 64 hedge fund portfolios held United Rentals, down from 74 in the previous quarter. The stock, which carries a $67.15 billion market capitalization, closed at $1,071.82 on July 16. While shares are up 32.64% over the past 52 weeks, they have dipped 0.46% over the last month.
For market professionals, the divergence between United Rentals' operational momentum and declining hedge fund ownership presents a notable dynamic. The company is proving that tech sector spending requires significant physical support. Yet, the continued rotation into pure-play technology names suggests the market is not yet fully pricing in the sustained value of this industrial demand.
