UK's Ashtead shares plunge on profit warning, proposed U.S. listing

Investing.com -- Shares of Ashtead Group (LON:AHT ) fell sharply on Tuesday, dropping over 9% following the company’s downward revision of its profit expectations for the fiscal year. 

The warning came as Ashtead cited weaker-than-anticipated demand in its key U.S. markets, compounded by persistent high interest rates, which have slowed the recovery in the construction sector. 

The company's second-quarter performance missed consensus earnings expectations by about 4%, reflecting soft rental revenue growth in the U.S. and a less boost from hurricane-related demand than previously hoped.

Ashtead’s updated guidance reduces its full-year rental revenue growth projection for the U.S. to between 2% and 4%, down from the earlier forecast of 4% to 7%. 

The group’s profit outlook has also been revised lower, underscoring the challenges posed by an uneven recovery in the construction and equipment rental markets. 

Additionally, Ashtead generates approximately 95% of its earnings before interest, taxes, and amortization from its U.S. operations, making it highly sensitive to shifts in the region’s economic conditions.

Despite these challenges, Ashtead announced plans to initiate a $1.5 billion share buyback program and explore a primary listing in the United States. 

These moves are aimed at optimizing capital structure and aligning its corporate presence more closely with its operational footprint.

Analysts from RBC Capital Markets expressed mixed sentiments, suggesting the company remains well-positioned for long-term gains as market conditions improve. 

However, the near-term outlook remains uncertain, with RBC flags risks such as elevated interest rates, potential economic slowdowns, and ongoing pressure on commercial construction activity.

Source: Investing.com