Ashtead shares rose on Tuesday after the North American-focused plant hire group announced rising revenue, which bodes well for the company as the Fed cuts rates.
After a decade of bumper growth, Ashtead’s growth outlook has become increasingly unclear amid mixed US construction activity.
However, today results will be a source of encouragement for investors as revenues grew 2% in the group’s first quarter. The company attributed the tick higher in revenue to rising rental volumes and the amount they were able to charge for an average higher.
EBITDA rose 5% but operating profits slipped 2% as a result of higher interest costs. But with the Federal Reserve on the verge of cutting interest rates, this constraint on earnings may be about to ease.
Ashtead shares were over 4% higher at the time of writing.
“Equipment hire firm Ashtead has today announced a changing of the guard in terms of its CFO but perhaps more pertinently, a slip in profit in comparison to last year. Ashtead, which services construction, emergency response and events, has seen its numbers hurt by a comparative slowdown in the US, where the company does the lion’s share of its business,” said Adam Vettese, Market Analyst at investment platform eToro.
“Revenue is actually up year-on-year but this was not enough to offset increasing interest and depreciation costs, which we expect to ease as the Fed cuts rates. As such, the firm has maintained its guidance for the rest of the year.”
Although growth concerns may linger, one of the biggest considerations for investors is whether Ashtead remains a London-listed company or decides to follow other firms in switching its listing to the US in pursuit of a better valuation.
“There is likely to be a fresh round of questions about whether Ashtead is looking to shift its listing to the US after news that the CFO role will be based in the US when Michael Pratt retires in September. Alex Pease will take up the role, and management has confirmed it will likely be based in the US,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.