Investing.com -- Shares of Ashtead Group (LON:AHT) fell sharply on Tuesday, dropping over 9% following the company’s downward revision of its profit expectations for the fiscal year.
The warning came as Ashtead cited weaker-than-anticipated demand in its key U.S. markets, compounded by persistent high interest rates, which have slowed the recovery in the construction sector.
The company's second-quarter performance missed consensus earnings expectations by about 4%, reflecting soft rental revenue growth in the U.S. and a less boost from hurricane-related demand than previously hoped.
Ashtead’s updated guidance reduces its full-year rental revenue growth projection for the U.S. to between 2% and 4%, down from the earlier forecast of 4% to 7%.
The group’s profit outlook has also been revised lower, underscoring the challenges posed by an uneven recovery in the construction and equipment rental markets.
Additionally, Ashtead generates approximately 95% of its earnings before interest, taxes, and amortization from its U.S. operations, making it highly sensitive to shifts in the region’s economic conditions.
Despite these challenges, Ashtead announced plans to initiate a $1.5 billion share buyback program and explore a primary listing in the United States.
These moves are aimed at optimizing capital structure and aligning its corporate presence more closely with its operational footprint.
Analysts from RBC (TSX:RY) Capital Markets expressed mixed sentiments, suggesting the company remains well-positioned for long-term gains as market conditions improve.
However, the near-term outlook remains uncertain, with RBC flags risks such as elevated interest rates, potential economic slowdowns, and ongoing pressure on commercial construction activity.