Ashtead Earnings: Guidance Lowered; Slightly Reducing Our Fair Value Estimate

No-moat Ashtead confirmed the group will be cutting revenue and free cash flow guidance for the full year, having released a trading statement two weeks prior. Prolonged strikes by the Writers Guild of America and SAG-AFTRA, as well as fewer natural disasters in the U.S., have lowered demand expectations for construction and specialty equipment. Free cash flow guidance was halved from $300 million to $150 million, and the midpoint for revenue growth was lowered by 2.5% to 12% growth, compared with initial guidance provided. Ashtead's ambitious capital expansion plans remain intact, and thus the decline in demand is expected to directly impact free cash flow generation. Combined with the impact of a slightly stronger GBP, we have reduced our fair value estimate to GBP 45.50 from GBP 48.50. Shares are fairly valued.