管理層發言
Good morning, everyone, and welcome to the United Rentals Investor Conference Call. Please be advised that this call is being recorded. Before we begin, please note that the company's press release, comments made on today's call and responses to your questions contain forward-looking statements. The company's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control. And consequently, actual results may differ materially from those projected. A summary of these uncertainties is included in the safe harbor statement contained in the company's press release. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10-K for the year ended December 31, 2025, as well as the subsequent filings with the SEC. You can access these filings on the company's website at www.unitedrentals.com. Please note that United Rentals has no obligation and makes no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations. You should also note that the company's press release and today's call include references to non-GAAP terms such as free cash flow, adjusted EPS, EBITDA and adjusted EBITDA. Please refer to the back of the company's recent investor presentation to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Matt Flannery, President and Chief Executive Officer; and Ted Grace, Chief Financial Officer. I will now turn the call over to Mr. Flannery. Please go ahead, sir.
Thank you, operator, and good morning, everyone. Thanks for joining our call. As evidenced in our second quarter results, 2026 is on track to be a great year for Team United as we continue to execute our strategy and prove ourselves as a partner of choice for our customers. Our growth accelerated in the quarter. Customers remain optimistic, particularly around large projects, and we continue to exhibit strong cost discipline. Our one-stop shop value proposition, coupled with our technology, service levels and an unwavering focus on safety and customer productivity continue to differentiate us in the industry. Coming into the year, we set the bar high for the team, and our results are a testament to both their collective efforts and the strategy we've been laser-focused on for the better part of 20 years. As we enter the second half of the year, I'm pleased to raise guidance as we provide our customers a best-in-class partnership while generating strong shareholder returns. So let's get into the details of our second quarter results and our updated full year guidance, and then Ted will get into more details around the numbers before we open up the call to Q&A. Starting with the quarter's results. Total revenue grew by 12% year-over-year to $4.4 billion. Within this, rental revenue grew by almost 13% to $3.8 billion, both quarterly records. Fleet productivity of 3.4% contributed to OER growth of 9%. Adjusted EBITDA was just over $2 billion, resulting in a margin of 46.6%. And finally, adjusted EPS came in at $12.76, up 22% year-over-year and another quarterly record. Now let's discuss customer activity. We continue to see growth across both our gen rent and specialty businesses. Specialty saw exceptional rental revenue growth of 25% year-over-year, including 11 cold starts and with growth across all lines of business. By vertical, the trends of the first quarter carried into the second, namely construction posted strong growth led by nonresidential and infrastructure. And on the industrial side, power continues to post double-digit growth, while metals and minerals also grew at a healthy rate. As you know, critical to our strategy is diversified exposure across end markets. In the quarter, we saw projects kick off in a variety of end markets, including hospitals, airports and LNG terminals to name a few, while data centers continue to be a source of growth. Now turning to the used market. We sold $624 million of OEC at a 53% recovery rate. We're on track to sell approximately $2.8 billion of fleet this year, supported by strong demand for used equipment. As we replace this fleet and grow to meet customer demand, we spent nearly $2.1 billion on gross rental CapEx in the quarter. Year-to-date, we spent $2.9 billion, which exceeded our expectations coming into the year. The demand environment continues to outpace our original expectations, and we're well positioned to support our customers' needs while continuing to focus on capital efficiency. After funding our year-to-date growth, free cash flow remained strong at nearly $1.2 billion. And as you've heard me say before, this is a critical feature of our company. The combination of our industry-leading profitability, capital efficiency and the flexibility of our business model enables us to generate meaningful free cash flow through the cycle, which can then be redeployed in ways that allow us to augment shareholder value. Finally, our capital allocation in the quarter reflects the disciplined framework we employ. Our balance sheet is in a great spot, allowing us to support both organic and inorganic growth and to also return nearly $500 million to shareholders during the quarter through a combination of share buybacks and our dividend. Our leverage of 1.8x remains well within our targeted range of 1.5 to 2.5x, leaving plenty of dry powder to support growth and to return excess capital to our shareholders. Now let's discuss our raised 2026 guidance, which reflects total revenue growth of almost 10% at the midpoint. When we spoke in April, we said the year was playing out better than we had initially expected. As we started to progress through our busy season, demand outpaced even our revised expectations. The large projects drove this demand in the first half of the year, and we expect that will continue through the second half. Our increased EBITDA guidance embeds the cost actions we outlined coming into the year as we proactively look to improve our efficiency and support profitability. And last but not least, we increased our CapEx guidance as we are running at historically high time utilizations and need additional fleet to support the stronger demand. So in conclusion, we're executing on our long-held strategy, and it's delivering the results we want. Our differentiated business model is truly unique in our industry and is enhanced by the implementation of cutting-edge technology across the business. We remain focused on leveraging innovation to support our customers' productivity and to drive internal efficiency gains. We are winning in the marketplace as our customers know they can depend on us not just to deliver the fleet they need when they need it, but to also provide an unmatched level of service. As we look forward over the longer term, we believe our relentless focus on what we do best, being the preeminent rental company, will continue to translate to profitable growth as enabled by our prudent capital allocation and balance sheet strength, strong free cash flow and compelling returns to our investors. And with that, I'll hand it over to Ted to review our financial results, and then we'll take your questions. Ted, over to you.
Thanks, Matt, and good morning, everyone. As Matt just shared, the year has continued to progress better than expected as we set all-time second quarter records for total revenue, rental revenue, EBITDA and EPS. More importantly, the increases to our 2026 guidance reflect our confidence that both the strength of demand and our team's discipline will continue in the back half of the year. But before we get into the details of the outlook, let's dive into the second quarter's results. As you saw in our press release, rental revenue increased $434 million year-over-year or 12.7% to a record of over $3.8 billion, supported again by strong execution across large projects and key verticals. Within this, OER increased by $246 million or 9%, driven by 7.1% growth in our average fleet size and fleet productivity of 3.4%, partially offset by assumed fleet inflation of 1.5%. Also within rental revenue, ancillary and re-rent grew nearly 28% or roughly 3x the rate of OER, adding a combined $188 million. Pivoting to used, we sold $624 million of OEC in the quarter, generating $330 million of proceeds at an adjusted margin of 47.3% and a 52.9% recovery rate. So another solid quarter there. Next, let's turn to EBITDA. Excluding the $49 million net benefit we realized this quarter from the sale of our scaffolding business, EBITDA increased $197 million to a second quarter record of just over $2 billion. This was primarily driven by a $231 million increase in rental gross profit and a $3 million increase in used gross profits. SG&A increased $39 million year-on-year, which was flat as a percent of revenue, while gross profits from other lines of businesses increased $2 million. Looking at profitability. On an as-reported basis, our second quarter adjusted EBITDA margin increased 70 basis points year-over-year. Excluding both the gain on the sale of our scaffolding business and the outsized growth in ancillary and re-rent revenues, which I think gives a better insight into our core cost performance, our second quarter margins increased 40 basis points year-over-year. Within ancillary, I'll note that we've been successful in passing through both higher fuel and delivery cost increases, which have driven revenue growth but brought limited incremental margin dollars. More broadly, our team continues to execute well on cost, which is helping us offset some of the ancillary impact I just mentioned as well as overall cost inflation. Shifting to CapEx. We've responded to robust customer demand by investing over $2.9 billion in gross rental CapEx year-to-date, which is an increase of more than $650 million year-over-year. Moving to returns and free cash flow. Our return on invested capital of 11.8% remained comfortably above our weighted average cost of capital, while free cash flow has totaled roughly $1.15 billion year-to-date. Turning to our balance sheet. Net leverage remained very comfortable at 1.8x at the end of June with total liquidity of almost $3 billion. As most of you know, a key element of our capital allocation strategy has been ensuring that we have a strong balance sheet supported by conservative financial policies, think leverage, liquidity and maturity management and consistent operating performance, particularly excess free cash flow. Along these lines, we were very pleased to see S&P recently acknowledged our progress on this front by raising our credit outlook to positive from stable with the potential to upgrade our credit rating from high yield to investment grade within the next 12 months. Turning to capital allocation. We have returned $998 million to shareholders year-to-date, including $750 million through repurchases and $248 million via dividend. Now let's shift to the guidance we shared last night, which reflects our confidence in delivering a record year. Total revenue is now expected in the range of $17.5 billion to $17.8 billion, an increase of $500 million versus our prior guidance, while used sales are still expected at around $1.45 billion. At midpoint, this now implies full year growth ex-used of over 10% versus our original guidance of closer to 6%. In turn, we've also raised our adjusted EBITDA guidance by $300 million to a range of $7.975 billion to $8.125 billion, reflecting our continued expectation to bring the revenue growth to the bottom line by maintaining flat margins year-over-year. On the fleet side, we've increased our gross CapEx guidance by $450 million to a range of $4.85 billion to $5.25 billion in response to the stronger demand we see. This now implies net CapEx of $3.4 billion to $3.8 billion. And finally, we are reaffirming another year of strong free cash flow in the range of $2.15 billion to $2.45 billion, with the increase in rental CapEx offset by higher cash flow from operations. On the capital allocation front, we still intend to repurchase $1.5 billion of shares in 2026. Combined with our dividend, this will return roughly $2 billion to our shareholders this year, equating to approximately $32 per share or a return of capital yield of approximately 3% based on our current share price. So with that, let me turn the call over to the operator for Q&A. Operator, please open the line.
分析師問答
We'll go first this morning to David Raso with Evercore ISI.
A question on margins and a question on end demand. First, on the margins, the second quarter margins excluding the gain were down about 40 basis points year-over-year. The implied second half margins are up year-over-year 10 to 20 basis points. What are the swing factors when you think about labor absorption, delivery repositioning costs, some of the restructuring savings to think about that swing from the down margins to up a bit in the second half of the year? And then for the end demand, I was intrigued by the comment historically high time utilization. We're starting to see the industry add capacity again, and you always wonder about supply-demand balances when we get a recovery in the CapEx numbers. That historically high time utilization comment, given the nature of large projects, more long-dated, is some of the CapEx increase being provided confidence to do it given the visibility on '27? Are you starting to get a better look at '27 on the demand at this high time utilization can stay at a pretty high level even as you're adding CapEx?
Yes, David, this is Matt. I'll take the demand part first and then let Ted walk you through the margin. So we certainly feel good about the demand. To your point, we wouldn't be bringing in this more fleet just to chase the last dollars of revenue here in the back half of 2026. We feel good about the pipeline of the large projects. We're not going to give 2027 guidance, but we certainly think these tailwinds that we've been talking about for a while will carry into next year. And that gives us the confidence to bring in more fleet as well as the combination of really strong fleet productivity at record time utilization. So there would be no reason for us not to feed that type of performance unless we thought demand was coming to an end, and that's not in our sight at all. Ted, do you want to touch on the margins?
Yes. On the margin side, David, I'd say a couple of things. If we look at how we started the first half of the year, we're up about 10 basis points on an underlying basis. So the team is doing a great job of managing that. Certainly, we would expect that kind of performance to continue in the back half. There's always going to be normal quarter-to-quarter variability if you think about just the second quarter in the context of your question. But we feel confident that the team is doing everything we've asked them and has us in a good position to achieve our goal for the year, which is flat margins, excluding the impact of H&E last year.
Would you mind just a little more color? Do you see the spread that widened in the second quarter, ancillary outgrowth versus OER growth? Do you see that spread narrowing to take a little pressure off that mix? Is there delivery repositioning costs? Maybe some quantification of how to think about that? Again, just trying to think of a few building blocks on that. I know the volume improvement there.
Yes, absolutely. It won't surprise anybody that it has been difficult to forecast ancillary. We did see another outsized growth in the second quarter. In terms of the third quarter, we'll see what happens there. Certainly, fuel is part of that. Our expectation is that fuel prices probably remain constant second quarter versus third quarter. And that will have some impact on where we fall within the range. But otherwise, we expect to have another strong quarter of growth, solid fleet productivity and good cost execution that we think puts us in a good position to hit our goals.
We'll go next now to Rob Wertheimer with Melius Research.
My question is a little bit on fleet productivity, and I know you don't want to disaggregate fleet productivity. I get it. But the decision to add CapEx seems like there's a lot of demand. Is rate where you want it to be, or is it getting there fast? Your margins are actually quite good, not quite at peak, so I don't know if you have an ambition to grow beyond where peak was. Just that balance between rate and CapEx is my first question.
Yes. That's the right question to ask, Rob, because we need to get rate to further fund the business, and the team did a great job executing on that. The way we view it is they earned this extra CapEx by driving great fleet productivity. Even though we don't talk about rate numerically, we certainly focus on rate a lot as a team, and we need to because we have to offset the inflation that's obviously impacting everybody in the business. So the team has done a great job continuing to drive price for the value that we offer as well as utilizing the fleet. So it certainly is part of our decision, and the team did a great job of earning the right to get more fleet.
Perfect. And just the other one is just on margin. It's obviously, from our side of the table, hard to forecast some of the transportation costs, et cetera, that come as the industry has evolved to serve a little bit more bigger projects. With the rise in demand, does that risk fall further back because for one, you're kind of comping some of those issues. And for two, you can kind of ship more fleet to new projects? Or should I think about that as being an ongoing minor unpredictability? I'll stop there.
Certainly, I'd say our ability to predict it is challenged just given the nature of these projects and some of the timing dynamics we've talked about. That being said, we've talked about the initiatives and the effort we've really leaned into this year. If you look at the delivery costs, the team has done a great job. If you look across our big three costs within core — labor, delivery and R&M — you can see we're actually ahead of the curve on all three. We were in the second quarter, and we are year-to-date. From that perspective, the team is finding ways to be more efficient in the face of ongoing repositioning costs. We expect to continue to see good results there. But in fairness, that was probably the biggest point of variability we've thought about at the beginning of the year, and we talked about the need to offset it through some of the cost actions we're taking.
We'll go next now to Michael Feniger with Bank of America.
Matt and Ted, I know we talked about the margins. You obviously saw headwinds last year on ancillary and delivery costs. You made some adjustments this year. You have cost savings. Is there anything you're observing this year that you guys are highlighting that there's more levers to pull to think about that for 2027? Ted, maybe you can outline the headwind you're absorbing this year or in the quarter just on fuel alone. It doesn't seem like that would be there next year. Just trying to see if this absorption on labor and R&M can keep improving as we look forward into next year.
In the quarter itself, if you just think about the incremental fuel cost that we absorbed running the business — fuel used in service trucks, sales vehicles, managed vehicles, etc. — that was probably, in isolation, 20 to 30 basis points of additional headwind year-on-year versus what you would have seen even in the first quarter where there was very little fuel effect. We'll see how geopolitics play out and what happens with oil markets and diesel and gasoline prices. But certainly, that would be one thing. And the other thing we've talked about: at some point, local markets come back and then we're better able to leverage the network. That should help us on the delivery cost side, specifically that repositioning cost that we discussed in 2025 and that we're still managing through in 2026.
I would just say, in addition to the work we've put in here in the first half of this year, delivery is positive absorption for us as opposed to rent revenue. With fuel increases alone, our outside hauling cost per mile has gone up. To be able to have that kind of positive relationship between the cost of delivery and revenue growth, we will continue to grow upon that baseline and execute.
Matt, just a follow-up. The verticals like utilities and power, what type of growth are you seeing there today? How big is this for you? Is there any way for us to size that? Are you one of the biggest power rental fleets out there? And when you think of M&A with your leverage, is this an area that you're looking at to get bigger in? Just curious what you're seeing there on these verticals and adjacencies and how we could think about sizing that up?
Two different things. As far as the power vertical end market, that's growing well and is in excess of 10% of our business; we're really pleased with that. If you're talking about power as a product, this business has been growing organically in double digits for the past 10 years. We don't necessarily talk about how big it is in absolute terms here, but it is a very important part of our business and one of our largest asset categories. We're pleased with the previous growth and the headroom ahead. The footprint is built out, so now we're just feeding organic growth in that business and they're doing quite well.
We'll go next now to Steve Fisher with UBS.
Just a bigger picture question about repositioning costs relative to CapEx. I think part of the margin headwind you've had to deal with over the last 18 months or so is incurring cost to reposition compared to what you're actually shipping from the OEM factories to projects. Now that you're ramping up CapEx again, to what extent does that help the relative impact of repositioning on margins? Maybe it depends on whether we're talking about gross margins or EBITDA margins, but can you get some margin help from ramping up CapEx versus repositioning? And when do you think we could get to a point where we really don't need to call out the repositioning impact anymore and it's more normalized?
I'll start and let Ted give you numbers. We're not calling out repositioning cost too much right now other than the cost of fuel. We're having positive absorption in that. As demand gets broader, we'll be able to leverage the broader network, which will give relief. We found a way to work through repositioning after being challenged with it last year. I wouldn't say this CapEx is the sole reason we're having positive delivery absorption. That would be more true if we weren't running at higher time utilization. It's really about the availability of the fleet where you need it that would help that. So I wouldn't call CapEx the main reason for positive delivery absorption; it's more about feeding demand because we're running hot from a time utilization perspective.
It's hard to quantify repositioning cost this year. Last year was easier because the relationship between delivery growth and rental revenue growth was unusual — 20% growth in delivery costs versus 6% to 7% growth in rental revenue implied something like $115 million of excess cost that we absorbed. When you do that math now, in the second quarter, rental revenue was up 12.7% and delivery up 11.7%. So that repositioning cost continues to be something we're working through. We have found ways elsewhere to absorb it. We've made behavioral changes across the team to balance customer service with efficiency, and they've done a great job year-to-date. We've got to keep it up to hit our goals. CapEx can address it, but you've got to do it in a capital-efficient manner. When you decompose fleet productivity, you can see that time was positive again. So we're continuing to be effective.
Really helpful. Just curious how hard it is for suppliers to react to more of the demand you're asking this year? Is the challenge that they're getting more broad demand across the rental industry? Or is it just larger projects that they're able to serve because it's really just larger projects they need to serve? Or is it broadly across the industry?
Certain categories are pretty tight. Fortunately, we do a large amount of advanced purchase orders. We plan well in advance for about 80% of our spend. We're pleased suppliers were able to react enough to give this increase. If we wanted another billion dollars worth of fleet immediately, we wouldn't be able to get it. So it's about working with the team, planning in advance, and pulling orders up where we can, which has allowed us to support this extra demand.
We'll go next now to Jerry Revich with Wells Fargo.
Nice to see the specialty asset grow by about $1 billion plus and really nice growth in the branch count. Can you unpack that for us — what part of the specialty portfolio has grown the fastest over the past 6 to 12 months? And then the CapEx outlook in the back half of the year, how much more can we grow the asset base within specialty specifically with the CapEx raise?
I'll do my best to help, and Matt can jump in. All seven parts of the specialty business are growing well this year; they're all in double digits. It's hard to compare them apples-to-apples because some are younger and we're building scale. Mobile modular and mobile storage, ROS, statistically are probably putting up the strongest growth, but they're the smallest in the context of the business. Power and HVAC are also posting very strong growth. Fluid Solutions is doing a great job, trench and safety is doing well, and tools and matting are contributing. We're pleased with growth across the board — not one segment, but all seven pulling in the right direction and contributing to the 25% year-on-year growth you saw.
When you think about our go-to-market strategy, this is expected. Large projects are more complex; our customers need more service. We're outpacing expectations because of our one-stop shop capability. We need all those specialty business units to support those needs. It makes sense to see significant growth across them.
From an end market standpoint, you mentioned large projects are really strong. Semis and electronics have been in decline since 2024 and are now inflecting positively. Are you starting to deliver more equipment onto the next round of semiconductor fabs? Is that an uptick this year or still in front of us? And a similar question in power: large behind-the-meter data center construction plans are set to accelerate next year. Have you already started delivering equipment on sites there? Has that accelerated in your mix?
Both have accelerated in the second quarter. The semiconductors sector has grown and power continues to be a strong end market for us.
We'll go next now to Kyle Menges with Citigroup.
You're growing revenue 10% this year with pretty much no help from local markets. With the pipeline of mega projects and that visibility you have, how do you think you can grow in the next couple of years if local markets come back? And what are you seeing in local markets this year?
Local markets have stabilized since January and have grown low single digits. That's good news because we're able to drive growth on the major projects. Looking forward, it's not only local markets you can rely on. Other sectors that are not growing now, such as petrochem and industrial manufacturing, represent opportunities if they reaccelerate. Residential recovery and the infrastructure to support it could also drive local-related growth opportunities. We feel good about prospects across those channels.
Also an update on the M&A pipeline: how strong is it and are you still targeting specialty deals? Any of size in the existing pipeline?
The pipeline remains robust. This growth is primarily organic, but we have the dry powder and capability to integrate acquisitions well. We are working the pipeline with opportunities of all shapes and sizes. Adding new products or enhancing specialty offerings is top of mind, and we evaluate deals constantly. Stay tuned.
We'll go next now to Ken Newman with KeyBanc Capital Markets.
Congrats on the nice quarter. A clarification on the rate question: given where we've seen used prices in the secondary market, is it fair to assume you'd expect some improvement in sequential rental rates into the back half? How do you think about the opportunity for rental rate improvement going forward?
We feel the supply-demand dynamics are positive to drive fleet productivity. Time utilization was up, and rate is a constructive factor. We expect to continue driving all components of fleet productivity positively, which should support rate.
Regarding new product pilots in specialty from your Analyst Day, any commentary on how those pilots are progressing or if you're seeing traction where an acquisition could gain more scale?
We don't foreshadow targets publicly. We continue to evaluate anything temporary on a project or plant — if it's temporary, we see an opportunity to support it. We're looking at everything we don't already have and some things we do have to accentuate, whether gaps in geography or product. We're constantly focused on targets.
We'll go next now to Seth Weber with BNP Paribas.
I wanted to circle back to your rate comment. You mentioned implementing some AI into pricing and rate calculus. Can you talk about where you are with that and whether it's contributing to rate progression or if it's still more on the come?
The team has many tools to maximize rates on any given transaction. Some things are in pilot mode. When we step back, industry discipline on supply-demand is probably the biggest factor driving success in rates right now. The tools are important and will be increasingly valuable, but right now industry discipline is the key driver.
Yes. As we continue to enhance tools with AI, those should be incrementally helpful over time.
Okay. On the cost savings: you referenced about $10 million earlier in the year. Is that similar for the second quarter? Should we think about that ratable through the year, $10 million to $15 million a quarter in savings, or does it accelerate?
That's a reasonable way to think about it. We estimate the second quarter benefit was about $12 million, which is effectively that annualized run rate. We've said we expect $45 million to $50 million of realized savings in 2026, and we're at a run rate consistent with that. In the quarter, we also took another $6 million of charges, so we're at $51 million year-to-date. For the full year, we still expect charges of $55 million to $65 million, so everything is going to plan on those restructuring activities.
We'll go next now to Mircea Dobre with Baird.
Going back to your comment about record time utilization, congrats on that. Based on what you know competitively and benchmarking you do, is this record time utilization specific to your business due to things you are doing, or would you say the industry as a whole is reaching a balance where equipment supply versus demand is getting tighter and you're seeing good utilization broadly?
It's both. Our scale, tools and major project work help drive time utilization at a premium to the industry. But we also believe the industry overall is driving higher time utilization year-over-year. We expect to hear similar results from other public companies. We aim to maintain a premium over the industry.
If utilization is improving broadly, and local markets recover a bit, how do you think about the capacity of the industry and your suppliers to scale up to meet incremental demand?
Smaller localized players in the space will probably fill some of that gap. We feel good about sourcing future demand given our distributed footprint and the data we have in the field to plan ahead. If local markets were strong now with major project work, it would be challenging today. Our data and touch points should help us get ahead of that curve.
We'll go next now to Jamie Cook with Truist.
Nice quarter. Two questions. Ted, could you update us on the setup for incremental margins this cycle? You referenced ancillary as a headwind and noted cost actions; does investing in tech go up or down relative to the aspirational targets you laid out at Analyst Day of the 50% to 60%? Second, with markets in recovery and suppliers able to ramp only to a certain degree, to what degree do you think the industry will consolidate or use acquisitions to get fleet?
I'll take the first part. Our goal is to drive margin expansion. If you look at year-to-date results and the second quarter, we're doing that on an underlying basis, which is the most important measurement internally. On an as-reported basis, second quarter adjusted EBITDA margin was up 70 basis points year-on-year; backing out the scaffolding gain, margins were down about 40 basis points year-on-year due to outsized ancillary growth. Adjusting for that outsized growth, margins were up 40 basis points year-on-year, even while we absorbed 20 to 30 basis points from higher fuel prices. That indicates underlying cost performance. Labor, delivery and R&M all show positive absorption year-to-date and in the second quarter. Going forward, the core should continue to drive margin expansion. Ancillary and re-rent are influenced by customer needs and are harder to predict, but these activities are part of what's driving strong growth. We won't shy away from supporting customers and will explain the margin impact as appropriate.
On consolidation, the trend will continue. The big players will get bigger and consolidation is part of that. Players that previously relied on cold starts have also realized acquisitions can be a faster and more complete way to fill gaps when the economics make sense. That will remain part of the industry's evolution.
One quick question on the CapEx increase: what was the implied split between gen rent versus specialty in the raised forecast?
We haven't broken that out specifically, but you can assume growth in each of those. There's a lot of specialty growth embedded in the CapEx number.
We'll go next now to Angel Castillo with Morgan Stanley.
You mentioned you could potentially get upgraded to investment grade over the next 12 months. How important is that to your capital allocation strategy? Your leverage is near historical lows and continues to decline with strong fundamentals. How do you weigh the investment-grade opportunity versus M&A or more buybacks?
That's a great question. It doesn't materially affect our capital allocation strategy. We're comfortable with migrating to investment grade. Our credit metrics have screened IG for many years, and it was our internal financial policy that kept us in high yield to ensure balance sheet capacity to support inorganic growth. As we've grown, we've organically sourced much of our M&A capacity with our absolute EBITDA. After assessing our capabilities and capital deployment options, we believe migrating to investment grade and taking advantage of a lower spread does not constrain us in any way from pursuing M&A. It simply gives us optionality.
I agree. It has no downside for us, so we should take the opportunity if it's available.
On CapEx: you mentioned if you wanted another $1 billion worth of fleet, you'd be challenged to get it. Where specifically is there tightness in the supply base? You previously mentioned more availability of fleet from suppliers, but where is the tightness now? And early thoughts on 2027 CapEx needs versus this year's increase — will some of this increased CapEx this year set you up for next year?
The carryover from this year's growth helps next year, but it's too early to forecast next year's CapEx. We'll sell a little more used based on the bigger base of fleet rotation and replacement CapEx. Our planning process will give us a better idea of growth needs beyond the carryover. Regarding where it's tight: it's broad because major projects use everything. We plan well with advanced purchase orders, which helps, but some categories remain tight, especially those with high time utilization like aerials and reach forklifts.
We go next now to Sabahat Khan with RBC Capital Markets.
On the second half guidance moving higher versus initial expectations: was this a little bit of waiting to see how demand evolved, or did something inflect materially? You mentioned a bit about non-data center markets — did the pipeline accelerate? Also, is there an expected CapEx cadence for the back half?
We had confidence in April about the year, but we've exceeded expectations. The pipeline of projects moved faster and got deeper. More demand and strong execution from the team gave us more confidence for the back half than our April guide and enabled pulling more CapEx in. Regarding cadence, you can expect to bring in against the new guide somewhere around 30% to 35% in Q3 with the balance in Q4, similar to how we usually bring in capital.
On repositioning costs: have you adjusted the business structurally, reduced costs, and gotten customers to take some increases? Or is it primarily that demand is strong and you're able to price for it better? How should we expect transportation cost evolution in the next few quarters?
It's a lot of hard work and operational change. When something gets away from you, you look at it differently. We've made deep changes to processes, coordination and field execution. The team has done a great job offsetting repositioning costs with improved processes and execution. Fuel increases mean cost per mile is up, so the positive absorption is mainly from process changes and execution in the field.
We'll go next now to Tami Zakaria with JPMorgan.
A follow-up on rental revenue: growth accelerated to 13% in the quarter and is up almost 11% year-to-date. Should we expect rental revenue growth to slow from the year-to-date double-digit rate, or what is your expectation for rental revenue growth for the next two quarters?
Look at the range we provided. We encourage people not to anchor to the midpoint but consider the range of outcomes. The back half volatility drivers are most likely ancillary and re-rent, where you saw acceleration in the second quarter. Those are difficult to predict. We did see a nice acceleration in OER, and we see a strong demand backdrop in the back half. We'll provide an update in October.
Another question on local market demand: what's holding it back from materially strengthening after staying stable for several quarters? Is it housing needing to come back, interest rates, inflation? What can spark this end market?
Several factors. Interest rates are topical and affect housing. Residential growth would feed infrastructure, schools, retail and other local needs. Small businesses need confidence to invest again. Inflation and interest rates influence local business investment. Those types of things would spur local market growth.
We go next now to Chad Dillard with Bernstein.
Matt, in your prepared remarks you said demand outpaced original expectations. Can you talk about pockets of surprise by business segment and by end market?
The surprises are really in the project pipelines. Local market growth of low single digits helped a little, but the big driver was major project pipelines across the board: hospitals, airports, LNG, data centers, stadiums, and pharmaceuticals. Power and semiconductors are notable contributors. In addition, areas like petrochem and downstream turnarounds have been postponed due to strong activity elsewhere, which is another factor. In short, major projects across many end markets are stronger and deeper than we expected.
Great. Second question: path to improving return on invested capital? What can United do itself, separating gen versus specialty?
Overall, driving NOPAT improvement and better capital turns is how to improve ROIC. We focus on margin expansion and fleet productivity. Margin expansion increases NOPAT; fleet productivity improves capital velocity and turns. Driving efficiency in fleet and underlying margin expansion should continue to improve returns. When we do M&A, we focus on cash-on-cash returns because acquisition accounting can be short-term dilutive to ROIC, so we maintain discipline to ensure value-additive deals.
And ladies and gentlemen, that's all the time we do have for questions this morning. At this time, Mr. Flannery, I'll turn things back to you, sir, for any closing comments.
Thank you, operator, and thanks to everyone on the call. We appreciate your time, and I'm glad you could join us today. Our Q2 investor deck has the latest updates. As always, Elizabeth is available to answer your questions. Until we speak again in October, stay safe. Operator, you can now end the call.
Thank you, Mr. Flannery. Thank you, Mr. Grace. Again, ladies and gentlemen, this will conclude today's United Rentals conference call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.