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The Ashtead (LSE: AHT) share price was up over 2% in morning trading after the group released its first-quarter results.
The London-based industrial equipment rental company has come a long way since it was founded in 1947 in the village of Ashtead, Surrey. Today, roughly 85% of its revenue comes from the US through its Sunbelt Rentals subsidiary. In fact, most of its 25,000 employees are based there, and the operational headquarters are firmly American.
The board now plans to move its primary stock market listing from London to the US — a shift that underlines where the future growth lies.
Q1 results
The headline numbers were steady, if not spectacular. Revenue rose 1.8% year on year to $2.8bn, and management reaffirmed its full-year revenue growth guidance of 4%.
Profit slipped 6% to $511.6m, compared with $544.4m in Q1 2024. The drop came from a 4.8% rise in operating costs, with part of that linked to a one-off $13m expense associated with the upcoming listing move.
On a more positive note, free cash flow guidance was raised, suggesting a healthy cash generation profile going forward. CEO Brendan Horgan described the quarter as “solid”, with revenues, profits and free cash flow all broadly in line with expectations.
Analyst view
Analysts at RBC Capital think Ashtead remains attractive over the long term but strike a more cautious tone in the near term. The backdrop for US construction is mixed, with local market pressures, high funding costs, labour availability issues and volatile materials pricing all weighing on sentiment.
Income-seeking investors may be less impressed. The dividend yield stands at just 1.5%, which looks modest compared with some FTSE alternatives. Still, the company has a strong record, with average annual dividend growth of 19% over the past decade. That level of consistency could be encouraging for those who prefer a blend of growth and income.
Risks to note
There are a few risks that could hold back the Ashtead share price. Heavy reliance on the US means exposure to the broader American economy — trade tariffs or geopolitical instability could hit demand for equipment rentals. Foreign exchange fluctuations are another factor, potentially reducing returns for UK-based investors when profits are translated back into Sterling.
It faces some competition from key rival, United Rentals, which is larger by market cap and benefits from economies of scale. However, both companies face similar pressures from the cyclical nature of the US construction sector.
It’s also worth noting that forecasts do not expect much in the way of share price gains over the next 12 months. Broker ratings are broadly neutral, suggesting limited growth potential in the near term.
Looking ahead
Ashtead appears to be a fairly solid business with a strong market share in the US. However, it faces headwinds from rising costs and intense competition.
For income hunters, the low yield may prove disappointing, even if the growth record is admirable. For those seeking near-term income or faster growth, there may be better opportunities elsewhere in the FTSE 100.
Personally, I think the shares are still worth considering for investors who want long-term global exposure and defensiveness. Keeping in mind that the move to the US will remove it from the FTSE 100 — but since the secondary LSE-listing will remain, existing shareholders needn’t do anything.
