United Rentals shares will slide over the coming year, according to Bernstein, as the construction sector slows. The company on Thursday downgraded shares in the landlord to underperform the market and lowered its price target to $269 from $307. That’s about 19% down from where the shares are currently traded. The downgrade comes as Bernstein expects United Rentals’ organic growth to turn negative over the next 12 months. “Local sentiment is deteriorating, construction equipment demand is showing signs of slowing, money supply growth leading URI’s organic revenue by four quarters points to negative organic growth in 23,” Chad Dillard wrote in one Note. “By contrast, The Street 23 forecasts sales growth of 7%.” Construction Slump The drop in demand in construction, which accounts for about half of United Rentals’ sales, is a major headwind. While recent bills like the Inflation Reduction Act and the CHIPs Act could help, they probably won’t be enough to ease the pressure on stocks, Dillard said. “Material cost inflation and lack of affordability are calling into question the economics of new residential and non-residential construction,” he said. “The average home costs eight times the average annual income, higher than on the eve of the GFC, and growth in non-residential construction costs is outpacing growth in house prices.” In addition, United Rentals has benefited from tight supply chains that have enabled it to compete with used equipment and over-earning rental sales. As demand slows and availability of goods increases while the supply chain recovers, it will weigh on United Rentals’ gross margins. Now is a good time to sell as the stock is up 35% over the past month, suggesting the market has yet to price in the potential for upcoming declines. “As fundamentals slow in 2H22 and the risk of downside revisions becomes more apparent, we expect URI stock to underperform the broader market,” Dillard wrote.