The broker noted that a strong economic environment and a boost from hurricane clear-up activity provided a positive backdrop for trading in the first half of Ashtead’s financial year.
Since then, the prospect of US tax cuts has got a lot more likely, providing a potential boost to earnings and economic stimulus.
“The Senate's passing of its tax reform bill brings the prospect of a cut to corporate tax rates another step closer. While the timing and magnitude of these cuts remains as yet unclear, Ashtead would be a clear beneficiary,” Numis opined.
The broker responded to the improving backdrop by increasing its target price for Ashtead from 2,000p to 2,500p; the shares currently trade at 1,999p, up 1.4% on the day.
Ashtead’s half-year results are due to be announced next Wednesday and Numis is forecasting underlying earnings of £901mln, up 19% from £757mln in the corresponding period of 2016.
The market consensus forecast is around £907mln.
Numis is forecasting adjusted pre-tax profit of £560mln, up 18% year-on-year.
The broker is expecting a continuation of the strong trading trends seen at both the Sunbelt and A-Plant operations in the first quarter.
Based on Numis’s earnings forecasts for fiscal 2018, the shares trade on an earnings multiple of 15, reflecting the strong growth environment and the potential for earnings upgrades over the medium-term.