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US president Donald Trump’s promises on infrastructure spending are benefiting equipment rental company Ashtead (AHT) but Hargreaves Lansdown said investors should be aware the business would be affected when the cycle turns.
Ashtead reported a 17% increase in first quarter rental revenues and a 20% increase in operating profit to £266.5 million. The shares jumped 4.5% to £17.59 yesterday.
The group also said it expected demand to rise as the US deals with the aftermath of hurricanes Irma and Harvey.
Analyst George Salmon said conditions had been ‘favourable’ for Ashtead recently thanks to weak sterling and promised US infrastructure spending.
‘Furthermore, Sunbelt, the group’s sizeable US business, looks like it could well be one of the first ports of call in the clean-up operation in both Houston and Florida,’ he said.
‘With Ashtead riding the crest of a wave, it’s easy to see why the group is raising capital expenditure and acquisition outlay. However, investors should remember that it remains a cyclical business and its £2.6 billion debt pile will still need to be services when the cycle turns. Historically the group hasn’t been great at navigating smoothly through the peaks and troughs.’