Ashtead slumps after double downgrade by Bank of America ML
Ashtead took a hit on Wednesday after a double downgrade by Bank of America Merrill Lynch, which cut the stock to ‘underperform’ from ‘buy’ and slashed its price target to 1,000p from 1,300p, pointing to a “triple whammy” of worrying trends.
Ashtead Group
5,772.00p
16:35 07/05/24
FTSE 100
8,313.67
17:14 07/05/24
FTSE 350
4,570.66
17:14 07/05/24
FTSE All-Share
4,522.99
16:54 07/05/24
Support Services
10,938.86
17:14 07/05/24
“We have become increasingly concerned that the rental rate environment has weakened in recent months and the outlook for further rate growth from the current cyclical peak looks increasing unlikely,” the bank said.
Bank of America said its concern was based on the shake-out from the oil and gas slowdown which is having an impact on second-hand values at auction, weaker commentary from United Rentals, and the fact that elevated levels of new equipment in the supply chain could add pressure to Oil Equipment Manufacturing prices and therefore yields.
“We believe Ashtead will struggle to make further progress until it can be shown that rate concerns are overdone.”
The bank has reduced its yield growth assumptions for 2017 and 2018 from 2% per annum to 0% in both years to reflect the weakening environment in Orderly Liquidation Values and OEM supply chain risks associated with inventory build.
In addition, Bank of America cut its earnings per share estimate for 2017 to 92.26p from 98.35 and for 2018 to 95.02p from 104.82p.
At 08:15, shares were down 5% at 990.50p.