Broker snap: Upgrades expected at Ashtead

7th Sep 2010 13:03

First quarter figures from equipment rental firm Ashtead should generate full year earnings estimate upgrades, Singer Capital Markets believes, with the outlook for the company looking promising."First quarter profit before tax of £11.9m significantly exceeded consensus, and our own very bullish estimate of £7.4m. However, Ashtead is building momentum in both its US and UK operations with the supply/demand relationship in balance, rates rising and its peers also reporting similar trends," said FinnCap analyst Andy Murphy. The broker thinks the current valuation looks compelling and it has reiterated its "buy" recommendation and 185p price target. Based on Singer's earning's forecasts for fiscal 2012 the company is trading on a price/earnings ratio (PER) of 10.3, and this is projected to fall to 7.4 in 2013. This compared to an average mid-cycle forward PER of 16.5 for the sector. "Finally, with the dividend now increasing, holders can look forward to an increasing return. We anticipate the dividend will be more than covered by earnings this year giving scope for Ashtead to exceed current dividend growth expectations," the broker said.