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Investing.com -- Ashtead Group plc (LON:AHT) was downgraded to “underperform” from “sector perform” rating by analysts at RBC Capital Markets, with analysts warning that a combination of rising costs, industry overcapacity, looming competition, and macroeconomic risks could weigh on the equipment rental company’s near-term performance, in a note dated Friday.
The stock closed at GBp 5,362 on Sept. 18, with a new price target set at GBp 4,600, a 13% downside. The analysts outlined a downside case of GBp 3,275, a 37% drop from current levels, and an upside case of GBp 6,775, or 28% higher.
“We lower our rating on AHT to Underperform on a range of micro, technical and macro concerns,” the brokerage said.
At the company level, depreciation costs have grown faster than rental revenue for years. Depreciation stood at 23% of group rental revenues in fiscal 2025, supported by a $19 billion fleet at original equipment cost.
RBC estimated consensus expectations for rental revenue growth implied EBITA about 11% too high for fiscal 2028.
“Depreciation growth running structurally faster than rental revenue growth with only limited scope for EBITDA margin expansion given upwards pressure on skilled wages, repairs and logistics,” the analysts said.
Industry conditions have also pressured margins. Overcapacity in multi-application equipment markets continues to limit rental rates, while auction data shows falling values in key fleet categories.
Forklift auction values fell 6.1% year over year in August, with inventories up 27.7%. Telehandlers were down 3.7% with inventory up 21%, and aerial lifts dropped 4.9% while inventory rose 4.2%.
Competition is another concern. A Bloomberg report said EquipmentShare is considering an IPO to raise more than $1 billion, potentially giving it greater scale in the U.S. rental market.
“This could raise further doubts around the rate outlook and prove a key competitor for incremental US equity capital at a time when we believe AHT need it most,” the analysts said.
Ashtead is preparing to list in the U.S. in early 2026, which may disrupt trading patterns. RBC noted Ferguson underperformed peers before its U.S. listing in 2022, setting a precedent for near-term volatility.
“AHT is set to list in the US in calendar Q126. There it will cease to carry the ’unique asset’ status it enjoys on the UK market,” the brokerage said.
Macroeconomic pressures add further uncertainty. Ashtead’s share price has historically correlated with the U.S. Homebuilders Equity Index and existing home prices.
Housing affordability remains low, raising risks of prolonged weakness in local rental markets. RBC also cited skilled labor shortages as a factor that could delay projects and slow volume recovery.
RBC left its earnings estimates unchanged, projecting revenue of $11 billion in fiscal 2026 and $12.4 billion in fiscal 2028.
Adjusted earnings per share are forecast at 365.5¢ in 2026, 409.8¢ in 2027, and 477.6¢ in 2028.
Dividend per share is expected to rise from 112¢ in 2026 to 142¢ by 2028, with yield increasing from 1.5% to 2%.
While acknowledging Ashtead’s longer-term market position, RBC added that near-term risks outweighed potential rewards. “We see better value cyclicals elsewhere,” the analysts said.