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On Tuesday, RBC Capital Markets adjusted its stance on Ashtead Group (LON:AHT) Plc, moving the equipment rental company’s stock rating from Outperform to Sector Perform. The firm also significantly reduced the price target to GBP 41.25 from the previous GBP 67.50. The revision comes amid concerns about the potential impact of major shifts in U.S. economic policy on the equipment rental market.
Analysts at RBC Capital highlighted the challenges Ashtead might face due to these policy changes, anticipating a decrease in equipment rental demand over the next year to year and a half. The firm has adjusted its revenue forecasts for Ashtead, projecting a 6% decrease for FY26 and a 13% decrease for FY27. However, the expected impact on earnings per share (EPS) is more pronounced, with a projected fall of 21% for FY26 and 33% for FY27.
The revised estimates by RBC Capital take into account the high operating leverage of Ashtead, which is exacerbated by financial leverage. This combination is expected to significantly affect the company’s earnings. The analyst’s EPS estimates now sit approximately 25% below the Visible Alpha consensus for FY26E.
Ashtead’s stock has already seen a notable decline this year, with an 18% drop year to date. This recent performance appears to be partially factored into RBC Capital’s updated price target, which now stands at 4,125 pence. The downgrade to Sector Perform reflects a more cautious outlook on Ashtead’s near-term prospects in light of the anticipated industry headwinds.
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