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Shares of Ashtead Group (OTC: ASHTF) experienced an uptick following the release of its robust first quarter earnings report. As of 6:05 AM (1005 GMT), the stock was up by 2.2%, trading at £5,480. This positive movement stems primarily from a commendable performance in its key US operations.
The company's rental-only revenue within the United States saw a commendable year-over-year increase of 7%. This growth has been underpinned by enhancements in both rental rates and volume. Specifically, the General Tool segment reported a modest revenue increase of 3%, while the Specialty segment surged ahead with an impressive growth rate of 17% during the first quarter.
Despite the generally favorable performance, it’s worth noting that earnings per share fell approximately 1.5% short of market expectations, although the overall group EBITA came in largely in line with forecasts. Analysts at RBC Capital Markets underscored that a higher depreciation charge, attributed to an expanded fleet and rising costs due to fleet life cycle inflation, impacted the results. Moreover, gains from disposals were around $45 million lower than in the previous year; still, the underlying EBITDA growth, excluding these gains, showcased a remarkable increase of 69%.
Geographically, Canada reported a resurgence in rental revenues as the dust settled post the writers' and actors' strike, although the EBITDA drop-through was slightly below what analysts had anticipated. Across the UK, revenue growth was more subdued; however, Ashtead Group has strategically concentrated on enhancing margins and return on investment (RoI), leading to results that surpassed expectations set by RBC Capital Markets.
Brendan Horgan, the CEO of Ashtead Group, expressed optimism, stating, “We have started the year well and expect full-year results will be in line with our expectations.” Analysts noted that, while the overall results were just below consensus estimates, there were no significant operational surprises in the company's core US segment. Notably, the Specialty segment is showing promising signs with accelerated growth in the high teens for the first quarter, further demonstrating the advantages of Ashtead's diversification strategy.
Despite the minor dips in certain areas, the company's forecast for the year remains steady, with anticipated rental revenue growth of 5-8%, capital expenditures ranging between $3.0 and $3.3 billion, and projected free cash flow around $1.2 billion. For stock traders, Ashtead Group presents an intriguing prospect, balancing resilience with areas of growth that could yield positive returns in the coming quarters.
