Ashtead advances as analysts foresee upgrades from 'lucky' quarter

RBC Capital Markets hoisted its price target for Ashtead Group ahead of the plant hire outfit's second quarter results next week.

As the quarter has historically been Ashtead's strongest, with six years of consecutive upgrades following the release of this statement, RBC reckoned a "lucky" seventh is inevitable given currently supportive end markets and favourable exchange rates.

Analysts expect to see double-digit rental revenue growth in the US and margins continuing to climb, with first-half group revenue forecast to grow 19.3% to £1.5bn, pre-tax profit growth of 21% to £411.2m, earnings per share up 20% to 53.8p and a dividend up 24% to 5.0p.

For the full year RBC's Andrew Gibb foresees EPS of 101.8p, ahead of the 99.7p consensus, but for 2018 it has upped its estimate to 117p versus the consensus of 111.5p as it sees a positive medium-term outlook, reinforced by the latest 2017 Dodge Construction Outlook forecasting total US construction starts advancing 5%.

"Given Ashtead has consistently outpaced its end markets by between 2-3x, this bodes well for the near-term growth outlook. With the structural growth story showing no signs of abating and spend on infrastructure potentially getting a major boost over the next few years, 10% compound growth in the top-line looks achievable," the analyst said.

Despite the near-40% gain in the share price over the past 12 months, Gibb continues to believe the stock looks attractively valued, upping his price target to 1,700p from 1,580p and keeping his 'outperform' rating.