United Rentals' (URI) Q1 results reflect better-than-expected fundamentals, and it remains one of the preferred picks in US construction, supported by attractive end-market exposure, self-help cost actions, and appropriately conservative full-year guidance, Morgan Stanley said Friday.

The company said Q1 rental rates remained positive, driven by a meaningful improvement in fleet productivity. This boosts confidence and helps ease concerns over rising competition, according to the note.

Strong Q1 incremental earnings before interest, taxes, depreciation, and amortizaton, or EBITDA margins of approximately 50% also signal a healthy business, bolstering confidence in its self-help cost actions and improving underlying returns, the brokerage said.

Even at the high end, United Rentals' full-year guidance reflects both upside potential and a reasonable degree of conservatism given ongoing macroeconomic uncertainty. The company expects modest acceleration in top-line growth of about 8% from Q2 through Q4, compared with 7% in Q1, according to the note.

As it leans more toward mega projects, Morgan Stanley believes United Rentals' top-line performance may continue to outperform.

The brokerage raised its Q2 sales estimate to $4.23 billion from $4.13 billion, its full-year 2026 estimate to $17.26 billion from $16.91 billion, and its 2027 estimate to $18.35 billion from $17.82 billion.

Morgan Stanley maintained an overweight rating on United Rentals and lifted the price target to $1,030 from $1,015.

Price: 971.09, Change: -15.69, Percent Change: -1.59