URI - Valens Credit Report - 2020 05 20
Cash bond markets are grossly overstating credit risk with a cash bond YTW of 5.021% relative to an Intrinsic YTW of 2.041%. Meanwhile, Moody's is overstating credit risk with its Ba2 rating three notches lower than Valens' IG4 (Baa2) ratingEarnings Call Forensicsâ„¢ analysis of the firm's Q1 2020 earnings call (4/30) highlights that management is confident their proceeds as a percentage of original equipment cost was healthy at 53%, and that they have had a procure-to-pay, seamless, and touchless system for a couple of years
Incentives Dictate Behaviorâ„¢ analysis highlights mostly positive signals for credit holders. URI's management compensation framework should drive management to focus on all three value drivers: asset utilization, margin expansion, and top-line growth, leading to Uniform ROA expansion and increased cash flows available for servicing obligations. Moreover, although most management members are not material holders of the company's equity relative to their average annual compensation, CEO Flannery's high equity multiples indicate that he may influence other NEOs to align with shareholders for long-term value creation
United Rentals is an equipment rental company that operates throughout the United States and Canada, and Europe. The company's general rentals segment includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities. This segment's customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The company's trench, power and fluid solutions segment includes the rental of construction products and related services. This segment consist of: Trench Safety region, Power and Heating, Ventilating and Air Conditioning region; and Fluid Solutions and Fluid Solutions Europe regions.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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