RBC Capital downgrades Ashtead, slashes price target
RBC Capital Markets downgraded equipment rental firm on Tuesday to 'sector perform' from 'outperform' and slashed the price target to 4,125p from 6,750p as it factored in a slowdown.
"We struggle to escape the conclusion that seismic changes in US economic policy are likely to lead to lower equipment rental demand over the next 12-18 months," the bank said.
"Despite lowering revenue forecasts by just 6% and 13% for FY26 and FY27 respectively, our EPS estimates fall by 21% and 33% due to high operating leverage, compounded by financial leverage."
RBC said this leaves the bank around 25% below Visible Alpha consensus for FY26E. It said this is partially reflected in the 18% share price decline year-to-date.
"The outlook for the US economy has deteriorated markedly since we upgraded AHT to outperform at the start of December last year," RBC said.
"We thought the election of President Trump would usher in a sustained period of corporate confidence in the US, accelerating the end of the equipment rental industry's mid-cycle slowdown in response to tightening monetary policy.
"How wrong we were, for all the reasons well known to investors. We now assume a -5% correction in US rental-only revenue in FY26 (to April), comprised -10% in General Tool and +8% in the structurally more resilient Specialty activities, with an implicit assumption that AHT (and peers) remain disciplined on rental rates."
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