UBS ups Ashtead to 'neutral' as slowdown priced in

UBS upped its stance on equipment rental company Ashtead to 'neutral' from 'sell' on Tuesday, lifting the target price to 1,800p from 1,700p as it said fears about a slowdown were priced in.

The bank said that while Ashtead's performance has been significantly ahead of its original 'sell' thesis back in December 2016, the shares have fallen by around 35% since early-cycle data started to deteriorate in August last year.

UBS said it sees downside risks to equipment rental demand this year amid weakening construction indicators, linked to tariffs. In addition, it reckons equipment rental supply is continuing to expand. The bank also pointed out that Ashtead faces tough hurricane-related comps for the next two quarters.

"While Ashtead continues to take market share and drive rental penetration, we therefore expect performance to slow over the next 12 months.

"However, after a circa 35% de-rating Ashtead is already pricing in 'end of cycle' risks; given our base case is not a full economic downturn, we believe risk/reward looks balanced."

At 1130 GMT, the shares were up 3.6% to 1,817p.