Ashtead raised to 'outperform' by Exane BNP

19th Jun 2015 12:51

Exane BNP Paribas upgraded Ashtead to 'outperform' from 'neutral' and raised the price target to 1,300p from 1,200p following year-to-date relative underperformance, as it believes both macro and micro conditions now suggest a re-acceleration in revenue momentum.It noted that Ashtead is accelerating its Greenfield expansion strategy, planning to add 50 branches in full-year 2016. "We believe the market underestimates the contribution to growth from Ashtead's Greenfield strategy and the lagged tailwind this will provide to returns," said Exane.The broker's above-consensus forecasts point to a three-year earnings compound annual growth rate of 24% and Exane sees around 20% upside in the shares.It said that improving US macro supports rental revenue momentum. "Despite soft manufacturing activity, better payrolls, improving retail spending and an anticipated rebound in residential construction point towards an improving macro backdrop, after a weak start to the year," remarked Exane.It added that overall, the company's full-year results were reassuring, with a small beat to consensus.In terms of the outlook, it noted that management remains positive, with the core-end markets still relatively early in the cycle and building starts data looking promising.At 13:02, Ashtead shares were up 1% at 1,111p.