Ashtead Group shares rise on strong Q1 results

Investing.com -- Shares of Ashtead Group (LON:AHT ) rose following its first quarter earnings report, buoyed by strong performance in its core US operations and other metrics. 

At 6:05 am (1005 GMT), Ashtead Group was trading 2.2% higher at £5,480.

The company reported a 7% year-over-year increase in rental-only revenue in the US was driven by improvements in both rental rates and volume.

The General Tool segment contributed a modest 3% increase in revenue and the Specialty segment showed a 17% growth in the first quarter. 

“EPS ~1.5% shy of consensus, despite group EBITA essentially in line with consensus,” said analysts at RBC Capital Markets in a note. 

A higher depreciation charge at the group level was seen, due to the larger fleet size and increased costs associated with fleet life cycle inflation. 

Additionally, while gains on disposals were approximately $45 million lower than the previous year, the drop-through to EBITDA, excluding these gains, was strong, with a 69% surge.

In geographical terms, Canada saw a rebound in rental revenues following the end of the writers' and actors' strike, although the drop-through to EBITDA was slightly less than projected. 

Meanwhile, the UK experienced more muted revenue performance; however, the company’s focus on enhancing margins and return on investment (RoI) yielded results that exceeded RBC Capital Markets' estimates.

“We have started the year well and expect full-year results will be in line with our expectations,” said Ashtead Group’s chief executive, Brendan Horgan

Analysts at RBC Capital Markets have flagged that while Ashtead’s results were marginally below consensus, there were no major operational surprises in its core US business. 

“But Specialty has accelerated a touch to high-teens growth in Q1, highlighting the ongoing benefits of diversification,” the analysts said. 

The company’s full-year guidance remains unchanged, with expectations for rental revenue growth of 5-8%, capital expenditures between $3.0-3.3 billion, and free cash flow around $1.2 billion.

Source: Investing.com