Company Reports

Ashtead unveiled its new financial targets for the next five years, having comfortably achieved its revenue forecasts provided in fiscal 2021. We believe its path to $14 billion of rental revenue by 2029 will also be comfortably achieved, given its short-term and long-term growth drivers. We raise our fair value estimate to GBX 5,300 from GBX 4,550, which is underpinned by an increase in our Stage II growth assumptions and a 130-basis-point increase to our average EBITDA margin estimates. Store expansion remains a crucial part of Ashtead’s growth equation and will keep capital expenditure spending elevated for the foreseeable future, reiterating the capital-intensity of the business. We view shares as fairly valued.

Ashtead Group is the second-largest rental equipment business in the United States, where it derives 90% of its profits, operating under the Sunbelt Rentals brand. The business has successfully expanded its share in a highly fragmented market from 4% in 2007 to 13% in 2023 in the US through a combination of its “cluster” strategy and bolt-on acquisitions. Despite increasing its store count by 40% since the start of 2021, the industry remains highly fragmented, providing plenty of runway for Ashtead to continue to gain share.

No-moat Ashtead reported a 3% decline in operating profit during the third quarter, reflecting the high capital intensity of the business. Prolonged strikes by members of the Writers Guild of America and Screen Actors Guild, as well as fewer natural disasters in the US compared with the prior year, have lowered demand for its equipment and subsequently led to underutilization following significant fleet expansion during the past few years. Shares traded 8% lower intraday, but still screen as overvalued to our GBX 4,550 fair value estimate, which we maintain.

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.

Ashtead Group is the second-largest rental equipment business in the United States, where it derives 90% of its profits, operating under the Sunbelt Rentals brand. The business has successfully expanded its share in a highly fragmented market from 4% in 2007 to 13% in 2023 in the U.S. through a combination of its “cluster” strategy and bolt-on acquisitions. Despite increasing its store count by 40% since the start of 2021, the industry remains highly fragmented, providing plenty of runway for Ashtead to continue to gain share.

No-moat Ashtead lowered its full-year revenue growth guidance to 11%-13% from 13%-16% to reflect fewer natural disasters than previous years, which has reduced demand for construction equipment required in the rebuilding phase. Strikes by actors and writers in Hollywood have also contributed to less demand for equipment that is commonly used in the filming industry. The shares have fallen 10% on the day, which we attribute to an elevated valuation rather than any fundamental concerns about the business. We maintain our GBX 4,850 fair value estimate and view the shares as fairly valued. Half-year results are set to be released Dec. 5.

Ashtead Group is the second-largest rental equipment business in the United States, where it derives 90% of its profits, operating under the Sunbelt Rentals brand. The business has successfully expanded its share in a highly fragmented market from 4% in 2007 to 13% in 2023 in the U.S. through a combination of its “cluster” strategy and bolt-on acquisitions. Despite increasing its store count by 40% since the start of 2021, the industry remains highly fragmented, providing plenty of runway for Ashtead to continue to gain share.

Ashtead Group is the second-largest rental equipment business in the U.S., where it derives 90% of its profits, operating under the Sunbelt Rentals brand. The business has successfully grown its market share in a highly fragmented market from 4% in 2007 to 13% in 2023 in the United States through a combination of its “cluster” strategy and bolt-on acquisitions. Despite growing its store count by 40% since the start of 2021, the industry remains highly fragmented, providing plenty of runway ahead for Ashtead to continue to gain share.

No-moat Ashtead reported first-quarter rental revenue growth of 14% year over year, tracking in line with its unchanged full-year guidance of 13% to 16%. Strong demand is underpinned by recent U.S. legislation, which has led to several large infrastructure and commercial projects requiring rental equipment. Strong demand has resulted in increased rental rates, supporting first-quarter EBITDA growth of 18%. The capital intensity of the business is reflected by more than $1 billion capital expenditure during the quarter, which resulted in free cash outflow of $139 million as incremental fleet investments are required for the business to grow. We maintain our GBX 4,350 fair value estimate and view shares as fairly valued.

No-moat Ashtead reported 22% rental revenue growth during its 2023 financial year, the midpoint of its guidance, which had been upwardly revised during the previous three consecutive quarters. Free cash flow of $531 million was ahead of our $300 million estimate but mostly driven by the late delivery of certain fleet equipment; thus, free cash flow is expected to decline to $300 million during the current fiscal year. Management has guided for 13%-16% rental revenue growth, of which one third relates to price increases. The anticipated decline in full-year free cash flow year over year despite double-digit revenue growth highlights the capital intensity of the business, which requires incremental additions of capital investment to grow. While we plan to revise our forecasts, we reiterate our GBX 4,350 fair value estimate. The shares appear fairly valued.

No-moat Ashtead continues to execute on its growth strategy and raised its revenue guidance for the third consecutive quarter. Management revised its full-year group revenue outlook to 21%-23%, an increase from the previously upgraded guidance of 18%-21%. However, the capital-intensive nature of the business means growth is met with incremental additions of capital investment, which sees the group's free cash flow guidance unchanged at $300 million. While we plan to adjust our estimates (mostly to include a greater revenue contribution from acquisitions), we reiterate our GBX 4,350 fair value estimate. Shares are fairly valued.

No-moat Ashtead raised its revenue guidance for the second consecutive quarter after delivering strong quarterly results. Second-quarter revenue grew 25% and continues to outperform the broader market due to market share gains through store expansion and bolt-on acquisitions. While we plan to tweak our short-term forecasts, we’re maintaining our GBX 4,350 fair value estimate as top-line growth is offset by further investments in its fleet. Shares are fairly valued.

No-moat Ashtead Group raised full-year rental revenue guidance following first-quarter revenue growth of 22%, which exceeded management’s forecasts. Full-year rental revenue guidance was lifted by 3%, translating into expected full-year growth between 15% and 17%, which falls in line with our expectations. The upgraded outlook was driven by improvements in volumes and rates given strong demand for rental equipment. We slightly raise our fair value estimate to GBX 4,350, which is primarily driven by the weakening of the British pound. Shares are fairly valued.

Ashtead Group is the second-largest rental equipment business in the U.S., where it derives 90% of its profits, operating under the Sunbelt Rentals brand. Ashtead has grown its market share from 4% in 2007 to 12% in the United States through a combination of its “cluster” strategy and bolt-on mergers and acquisitions. High-capital intensity and price-sensitive customers who decide whether to rent or buy have resulted in Ashtead placing a lot of emphasis on a low-cost strategy to ensure it remains competitive.

Ashtead Group is the second-largest rental equipment business in the U.S., where it derives 90% of its profits, operating under the Sunbelt Rentals brand. Ashtead has grown its market share from 4% in 2007 to 12% in the United States through a combination of its “cluster” strategy and bolt-on mergers and acquisitions. High-capital intensity and price-sensitive customers who decide whether to rent or buy have resulted in Ashtead placing a lot of emphasis on a low-cost strategy to ensure it remains competitive.

No-moat Ashtead Group’s full-year results slightly beat our expectations, delivering revenue and EBITDA growth of 19% and 18%, respectively. Ashtead has benefited from supply chain constraints, which has resulted in customers opting to rent rather than purchase equipment, supporting rental revenue growth of 22% in the current financial year. Full-year rental revenue guidance of growth between 12% and 14% is slightly weaker than we had anticipated. The group is betting that robust demand will continue despite economic uncertainty, by investing roughly $3.45 billion in the current year largely to expand its rental fleet and satisfy anticipated demand. As a result, free cash flow is expected to decline to roughly $300 million in the current financial year from $1.1 billion. We don’t expect to make meaningful changes to our estimates and reiterate our GBX 4,000 fair value estimate. Shares are fairly valued.

Ashtead Group is the second-largest rental equipment business in the U.S., where it derives 90% of its profits, operating under the Sunbelt brand. Ashtead has grown its market share from 4% in 2007 to 11% in the United States through a combination of its “cluster” strategy and bolt-on mergers and acquisitions, or M&As. High capital intensity and price-sensitive customers who decide whether to rent or buy have resulted in Ashtead placing a lot of emphasis on a low-cost strategy to ensure it remains competitive.

No-moat Ashtead reported solid third-quarter results, which saw Ashtead raise full-year revenue guidance for the third consecutive quarter, supported by strong demand and the rental rate environment. Rental revenue grew by 21% during the first nine months of its fiscal year, benefiting from customers unable to get their hands on construction equipment due to supply chain constraints, and thus opting for rentals. Full-year revenue guidance was lifted to between 19% and 21% from the company's previously raised guidance between 17% and 20%. However, as is typically the case, investments into a new fleet are required to satisfy demand, leaving the impact on free cash flow unchanged. We reiterate our GBX 4,000 fair value estimate and view shares as fairly valued, having seen the share price converge with our fair value estimate.

No-moat Ashtead Group raised revenue guidance for the second consecutive quarter following 15% revenue growth this quarter. Full-year revenue growth is expected to be between 17% and 20%, an increase of 4% from previously revised guidance. Strong growth requires additional investment into its fleet, which keeps free cash flow guidance unchanged. We maintain our GBX 40,000 fair value estimate and view shares as richly valued.

No-moat Ashtead Group raised full-year revenue guidance following first-quarter top-line growth of 23%, which exceeded management’s and our forecasts. Full-year revenue guidance was lifted by 7%, which translates into expected full-year revenue growth between 13% and 16%. The upgraded outlook is driven by a combination of high volumes and favorable pricing due to supply constraints for equipment used for construction and power generation. We increase our fair value estimate to GBX 4,000 per share from GBX 3,600, which is fully attributable to improved top-line expectations. We view shares as richly valued.