Shares in Ashtead PLC are down by a third from their November peak as investor concern about the effects of surging energy and commodity prices on the US economy override the upgraded earnings guidance at the equipment hire group’s past three updates and ongoing US$1bn share buyback.
Ashtead generates more than 80% of its sales and profits in the US via its Sunbelt construction equipment and plant hire arm.
Revenues growth has waxed and waned so far this year, up 21% in the first quarter, 15% in the second and 23% in the third, with management looking for full-year growth of 19% to 21%.
For the new financial year to April 2023, the current market consensus is for 13% sales growth to $8.9bn, with profit before tax to rise 16% to US$2.1bn.
Attention will also be on Ashtead’s investment plans, said analysts at AJ Bell: “if management is feeling bullish on the outlook, then it will buy more kit to rent out.”
Ashtead spent US$938mln on nineteen bolt-on acquisitions in the first three quarters, while capital investment almost tripled to US$1.7bn, with the budget for capex lifted to $2.4-2.5bn.
For Ferguson, a US-focused supplier of plumbing equipment, analysts at UBS expect third-quarter sales of to be up 12.9% to US$6.8bn and underlying profits (EBITA) up 8.9% to US$614mln.
“Key will be outlook and trading into Q4 against the backdrop of a slowing US housing market.”
Building momentum
As for the UK builders, we last heard from them in March, when Bellway PLC (LSE:BWY) was bullish, reporting a strong forward sales position of 7,491 homes and £2.2bn and indicated that it expected volumes for the year to July to be 11,100 at an average selling price of £305,000.
Volume growth for 2023 was pared back by around 200 units, but more than offset by price inflation.
For its part, Crest Nicholson PLC said it had continued to see good levels of demand and a sales rate of 0.98 per week, from 0.80 a year earlier, with its order book 84% covered for full-year revenue, and selling price increases continuing to offset build cost pressure.
With Bellway shares trading at a 23% discount to tangible net assets, “the case for excess capital returns via a buyback is beginning to look extremely compelling,” said broker Peel Hunt.
As for Crest, the broker said: “The interims will likely be playing a familiar tune of solid levels of demand, strong order books, and selling price increases ahead of build cost inflation. Given the growth strategy, the strength of the land marketis probably a cause for concern, hence the chance of smaller regional bolt-ons looks increasingly likely in our view.”
Tuesday 14 June:
Trading announcements: Ashtead Group PLC (LSE:AHT) (Ashtead Group PLC (LSE:AHT)), Bellway PLC, Ferguson PLC (LSE:FERG) (Ferguson PLC (LSE:FERG)), Games Workshop PLC
Interims: Crest Nicholson Holdings PLC, Foresight Sustainable Forestry Company PLC, Paragon Banking Group PLC (LSE:PAG) (Paragon Banking Group PLC (LSE:PAG))
Finals: CML Microsystems Plc (LSE:CML) (CML Microsystems Plc (LSE:CML)), DiscoverIE Group PLC, FirstGroup PLC (LSE:FGP) (FirstGroup PLC (LSE:FGP)), Iomart Group, OnTheMarket PLC (AIM:OTMP) (OnTheMarket PLC (AIM:OTMP)), Oxford Instruments PLC (AIM:OXIG) (Oxford Instruments PLC (AIM:OXIG)), Palace Capital PLC (LSE:PCA) (Palace Capital PLC (LSE:PCA)), Vianet Group (AIM:VNET) (Vianet Group (AIM:VNET)) PLC
AGMs: Andrew Sykes Group PLC, Coro Energy PLC (AIM:CORO) (Coro Energy PLC (AIM:CORO)), Everyman Media Group PLC (AIM:EMAN) (Everyman Media Group PLC (AIM:EMAN)), Fair Oaks Income Ltd, IP Group PLC (LSE:IPO) (IP Group PLC (LSE:IPO))
Economic announcements: Unemployment Rate (UK), Claimant Count (UK), PPI (US)