Ashtead Earnings: Decline in Operating Profit Reflects Capital Intensity of the Business

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.