US bank trims Ashtead after strong run

Jefferies has downgraded Ashtead Group PLC (AHT) to 'hold' from 'buy', lowering its price target to 5,700p, citing the stock's strong rally and re-rating to 20 times 2026 earnings, which now presents a 'balanced risk-reward' amidst muted near-term earnings momentum and potential margin headwinds. This move is part of a broader review of support services, which also saw upgrades for ISS and Adecco, and a downgrade for Hays PLC, with Jefferies emphasizing that earnings momentum and market positioning will drive relative performance into the second half of 2025.

Analysis

Jefferies has downgraded Ashtead Group PLC (AHT) to 'hold' from 'buy', reducing its price target to 5,700p from 5,900p, reflecting a more cautious near-term outlook despite a positive long-term structural view. The downgrade is primarily driven by valuation concerns after a strong share price rally, with the stock now trading at 20 times 2026 earnings, which Jefferies assesses as a 'balanced risk-reward at best'. The bank's analysis indicates that near-term earnings momentum remains 'muted', with potential for margin headwinds and a slow recovery in rental growth that could inhibit EPS growth over the next several quarters. This ratings change was part of a broader review of the support services sector, where Jefferies also downgraded Hays PLC (HAS) on expectations of continued negative earnings momentum. In contrast, ISS and Adecco were upgraded, underscoring the bank's thesis that earnings momentum and market positioning will be the primary drivers of relative performance across the sector in the second half of 2025.

Key Decisions for Investors

• Investors holding Ashtead should consider the analyst's view of a 'balanced risk-reward' at the current valuation of 20x 2026 earnings and may look to trim positions to realize gains from the recent rally.
• Potential investors should exercise caution, as near-term catalysts appear limited due to muted earnings momentum, potential margin headwinds, and a slow rental growth recovery highlighted by Jefferies.
• Across the support services sector, it is prudent to monitor earnings momentum and market positioning, as these are identified as the key differentiating factors for stock performance in the coming months.