Hollywood sign
US accounts for 90% of the company’s revenue / Image source: Adobe
  • Shares fell nearly 12% to £46.15
  • Downgrades 2024 profit estimates
  • Full-year depreciation charge of circa $2.1 billion

Shares in Ashtead (AHT) fell nearly 12% as the industrial equipment rental group said in a trading update that Hollywood strikes and ‘fewer naturally occurring events’ hit second quarter earnings.

Over the past year, Ashtead shares have dropped 4%, however, it shares have ‘failed to recapture their 2021 highs even after fiscal 2023’s string of forecast upgrades’ says Russ Mould investment director at AJ Bell.

Mould added: ‘It may seem unfair to drive a share price down by more than 10% when the profit forecast downgrade is only 2% to 3%, but investors do not seem to be in a forgiving mood when it comes to Ashtead’s less optimistic trading outlook.’

‘In many ways, the equipment hire specialist is a victim of its own success. Shareholders have enjoyed a string of upgrades to earnings estimates in the past couple of years, so even this very mild disappointment has come as a considerable shock.’

The ‘well covered writers and actors’ strikes’ have ‘impacted our film and TV business in Canada significantly’ and ‘longer than anticipated’ the company said.

Ashtead shares fall 5% despite positive first quarter results

Ashtead now expects group and rental revenue growth forecasts for the US in the range of 11% to 13% for the year to April 2024 (previous guidance for both was 13% to 16%)  - which will result in EBITDA (earnings before interest taxation depreciation and amortisation) being 2% to 3% below current market expectations.

The US accounts for 90% of the company’s revenue.

‘Before the surprise announcement, analysts had been looking for $5.2 billion of EBITDA in fiscal 2024, up 17% from $4.4 billion in the twelve months to fiscal 2023. A figure nearer to $5 billion now seems more accurate, given the revised outlook,’ added Mould.

Ashtead will announce first half and second quarter results for the period ending 31 October 2023 on 5 December 2023.

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.


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Issue Date: 20 Nov 2023