- Quarterly rental revenue up just 1%
- High interest rates impacting US market
- 2025 guidance kept but no 2026 outlook
From being a market darling and almost the poster child for the long-term benefits of compounding, the last couple of years have seen equipment hire firm Ashtead (AHT) struggle to make much headway.
The shares, which have more or less traded sideways for the last three years, dropped to a 12-month low of £45.85 on the back of the latest trading update which saw third-quarter sales undershoot market expectations.
GROWTH SLOWDOWN
For the three months to end of January 2025, Ashtead reported total revenue of $2.57 billion (£2 billion at current exchange rates), a 3% decline on the same period a year earlier and a marked deceleration from the 2% growth registered in the first half.
Rental revenue, which makes up the core of the business, was $2.38 billion (£1.87 billion) or 1% higher than the previous year, below the consensus forecast for a 2% increase and again a marked drop from the 6% growth rate of the first half.
Back in December, the firm lowered its full-year sales growth forecast to a range of 3% to 5% and warned earnings would be below estimates due to ‘local commercial construction market dynamics’ in the key US market.
This time round, the firm left its guidance unchanged, saying the strength of ‘mega projects’ and hurricane response efforts during the quarter had more than offset the lower level of activity in local markets, which continue to be impacted by the prolonged higher interest rate environment.
'MAJOR UNCERTAINTIES'
Despite the top-line disappointment, third-quarter EBITDA (earnings before interest, tax, depreciation and amortisation) and pre-tax profits were in line with forecasts thanks to what Jefferies’ analyst Allen Wells called ‘strong drop-through’.
However, Wells also noted the firm trimmed its full-year growth guidance for the Canadian business on weaker film rental and tariff uncertainty, and although it maintained its outlook for the year to April 2025, there was no guidance for the year to April 2026.
‘If Ashtead is a barometer for the health of the US economy, its results imply the country is coming down with a cold,’ commented AJ investment director Russ Mould.
The company is ‘staring into the unknown with major uncertainties over near-term earnings,’ added Mould, as tariffs create uncertainties over inflation, business sentiment and the economy.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (James Crux) own shares in AJ Bell.
