February 24, 2024

0904 GMT – Ashtead Group’s 1Q revenue of GBP2.26 billion was 7% ahead of Visible Alpha consensus as the good momentum seen in 4Q continued into fiscal 2023, RBC Capital Markets analysts Karl Green and Andrew Brooke say in a note. The industrial-equipment rental company is seen as a long-term beneficiary in North America’s fragmented equipment-rental market–where it has a 12% market share–with potential for international expansion, the analysts say. "We see the revenue mix as ever more resilient, bolstered by rapidly-growing, under-penetrated specialty solutions and the execution of the vast Infrastructure Investment and Jobs Act stimulus in the U.S. in coming years," they say. (anthony.orunagoriainoff@dowjones.com)

Ashtead’s Shares Could Continue to Underperform if U.K. Economy Softens Further
0903 GMT – Ashtead Group’s 25% revenue rise points to a strong 1Q as the company appears to be doing its best to navigate current challenges such as inflation, supply-chain constraints, worker shortages and rising interest rates, interactive investor analyst Victoria Scholar says in a note. The industrial-equipment rental company is a cyclical business subject to the ups and downs of the macroeconomy as well as the threat of a U.K. recession set to be a major headwind this year and next, Scholar says. "Despite the robust quarterly performance, shares have sharply underperformed the FTSE 100 this year, down 30% versus the U.K. index down around 2.5% year-to-date with the potential for further bearishness for the stock if the economy continues to soften," she says. (anthony.orunagoriainoff@dowjones.com)

Freeze in UK Energy Bills Would Ease Inflation, Increase Public Deficit
0850 GMT – Incoming U.K. Prime Minister Liz Truss’s reported plan to freeze electricity and gas bills for households is likely to ease inflation and soften the blow of an upcoming recession, but would also come at a fiscal cost, Berenberg’s chief economist Holger Schmieding says in a note. The plan could take Berenberg’s inflation forecasts down to around 10% in 4Q from 12.8% currently expected, and to around 9.5% in 1Q 2023 from 13.3%, he says. Moreover, the recession could be shallower as households would have more money to spend, Schmieding says. However, such intervention would mean extra public spending of GBP100 billion, adding to the public deficits and debt unless the government finds a way to finance it through taxes, he says. (xavier.fontdegloria@wsj.com)

Sterling Rises on Reports of Plan to Freeze UK Energy Bills
0840 GMT – Sterling gains after reports that Liz Truss, the new leader of the ruling U.K. Conservative Party, has drafted a GBP130 billion plan to freeze energy bills. "The news appears to partially ease the market’s concerns (that have weighed on GBP) that Truss’s promised tax cuts would ultimately worsen the inflation picture," ING analyst Francesco Pesole says in a note. Sterling faces further volatility in coming days as Truss’s policy plans are outlined in greater detail and the Bank of England’s Sept. 15 interest rate decision draws nearer, he says. GBP/USD rises 0.4% to 1.1561 and EUR/GBP falls 0.1% to 0.8610. (renae.dyer@wsj.com)

Centrica Rises After Short-Term Financing Chatter
0839 GMT – Centrica gains 3% following a report claiming the British Gas owner was in talks to secure billions of pounds of extra short-term financing from its banks. Centrica’s stock has risen 55% during the last year, underpinned by rising gas prices, Interactive Investor says. "However, price volatility could be starting to take its toll, with Centrica reportedly making contingency plans in case the situation worsens," Interactive’s Head of Investment Victoria Scholar writes. "Perhaps the energy giant is attempting to impose political pressure on [new U.K. prime minister Liz Truss], who could announce a type of financing support for Centrica and others as part of her plans to tackle energy in her first move as PM," she says. (philip.waller@wsj.com)

Oil Edges Down After ‘Symbolic’ OPEC+ Supply Cut
0729 GMT – Oil prices edge lower, reversing some of the prior day’s gains after a modest supply cut from OPEC+. Brent crude oil edges down 0.3% to $95.45 a barrel. While the cut was unexpected it is being seen as a largely symbolic move by analysts. The amount is small compared to the amounts the cartel has raised output by in recent months. "The cut is more symbolic and is likely to have little impact on market balances as it is only a fraction of the headline number," says in a note Giovanni Staunovo at UBS. "Many alliance members produce below their cap and this move will not affect their output." (william.horner@wsj.com)

Berkeley Group’s Reassuring Update Backs Guidance
0728 GMT – Berkeley Group’s reassuring trading update reiterates guidance of GBP600 million in pretax profit for fiscal 2023, though it is unlikely to significantly shift market consensus views, Citi says. The house builder has continued to enjoy resilient market conditions and the ramp up of site phasing should continue to support healthy order book levels, Citi analyst Ami Galla says in a research note. "While managing pricing amidst [a] challenging cost backdrop remains key, the progress to date looks reassuring," the U.S. bank says. Citi retains its buy rating and 4,665 pence price target on Berkeley’s stock. Shares are up 5.1% at 3,624.0 pence. (joseph.hoppe@wsj.com)

Berkeley Group’s Strong Order Book Will Appeal to Nervous Investors
0721 GMT – Berkeley Group’s update might not have been particularly exciting but its continued strong forward order book, covering much of calendar 2023, will continue to differentiate it to investors nervous about the housing market, Jefferies says. The house builder reports a good level of demand, with pricing above business plans and offsetting costs increases, and with its gross profit on its land bank and scope for capital returns its shares have significant value, Jefferies analysts Glynis Johnson and Priyal Woolf say in a research note. "[Berkeley] remains our top pick among U.K. house builders," the U.S. bank says. Jefferies retains its buy rating and 5,010 pence price target. Shares are up 4.4% at 3,600 pence. (joseph.hoppe@wsj.com)

U.K. Energy Prices Prompt Retailer Downgrades, Jefferies Says
0641 GMT – U.K. retailers are expected to see a reduction in earnings as rising energy prices lead to a cut in consumers’ available income, despite energy subsidies from the new government, Jefferies says in a research note. The bank says it lowers its estimates for retailers’ 2022 earnings by 6%, and its 2023 and 2024 earnings estimates by 22%. Jefferies estimates that income available to U.K. discretionary spending will contract by more than 6% in 2023-2024, as energy costs start to represent an enduring inflationary headwind. Jefferies downgrades its recommendations on J Sainsbury, Associated British Foods, Tesco, Kingfisher and B&M, while Next and Marks & Spencer remain at hold. "The scale of the challenges […] is such that we cannot recommend buying any of the seven stocks in this report," the bank says. (michael.susin@wsj.com)

Gilts, Sterling Will Judge Credibility of New UK Prime Minister’s Program
0624 GMT – The gilt market and sterling are unlikely to take too kindly to a big increase in U.K. government borrowing at a time of high inflation and rising interest rates, unless backed up by a credible plan to reduce government borrowing and debt over the medium term, David Riley, chief investment strategist at BlueBay Asset Management, says in a note. Liz Truss, the new U.K. Prime Minister, wants to cut taxes and regulations, but with government debt near 100% of GDP and interest costs rising, there is little fiscal room for maneuver, Riley says. "The immediate issues she faces–the energy and cost of living crises and a stagnating economy–reflect longer-term problems of low investment and productivity," he says. (emese.bartha@wsj.com)
Contact: London NewsPlus, Dow Jones Newswires; nihad.ahmed@wsj.com
(END) Dow Jones Newswires
September 06, 2022 08:04 ET (12:04 GMT)
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