Ashtead Group PLC (LSE:AHT), which reports results for the first quarter of its financial year next Tuesday, has seen its shares retreat around 12% from the two-and-a-half-year highs reached in April and May.
Much of that share price slippage for the FTSE 100-listed, but US-focused construction equipment hire group was on the back of year-end results in June that were slightly shy of previous guidance the mark but delivered a disappointing outlook for the new fiscal year.
As well as the 10% revenue growth for the past year being below the bottom of the 11-13% range it warned about earlier in the year, the company also reported a 2% drop in annual profit due to higher interest payments on its growing debt pile.
For the year to April 2025, Ashtead also guided to revenue growth of between 5% and 8% for Ashtead in fiscal 2025 at constant exchange rates, with US rental growth of 4-7%, which was well short of the analysts forecasts that were looking for 8%-plus.
As Ashtead gets around 85% of its sales and more than 90% of its profits from its US-based Sunbelt operation, with the bulk of the rest coming from Canada and the A-Plant business in the UK, it was perhaps surprising the slower US guidance had not dented the shares more.
Weak PMI readings and new homes sales data indicate the backdrop is not helpful for Sunbelt, but a Federal Reserve rate cut could provide a boost on those interest payments.
Analysts at AJ Bell said Ashtead's profit warnings in its last fiscal year were "mild" as chief executive Brendan Horgan cited lower demand thanks to the actors’ and writers’ strikes in Hollywood and a quiet hurricane season in the USA, rather than a more general economic malaise.
Horgan's revenue growth target of between 5% and 8% would represent some slowdown from the 12% underlying revenue growth achieved in the last year, the analysts added, which explains why the capital expenditure budget is lower, too.
"Generally speaking, the more optimistic Ashtead’s managers feel, the more kit they will buy so that they can hire it out, but Mr Horgan’s initial guidance for 2025 of $3.0 to $3.3 billion compares to last year’s $4.3 billion in spending."
As for profits, these are not likely to be mentioned in the first-quarter update, but analysts are currently looking for broadly flat pre-tax income at $2.1 billion, while any reference to the possibility of the share buyback programme returning will be welcomed.
As will news on acquisitions, where Ashtead spent $905 million completing 26 bolt-on purchases in fiscal 2024 and $1.1 billion on 50 purchases in fiscal 2023.
Finally, the company has managed to keep schtum on the subject of a mooted potential move of its main listing from London to New York, but with the likes of CRH, Kingspan and Flutter making the move, any comment would have an impact on the shares.