ii view: footy World Cup aids Sunbelt Rentals record results

A forklift in Miami Beach, Florida. Photo: Jeffrey Greenberg/Universal Images Group via Getty Images.

First-quarter results to 31 July

• Total revenues up 11% to $3.12 billion (£2.3 billion)
• Adjusted profit (EBITDA) up 8.7% to $1.32 billion
• A quarterly dividend of $0.30 per share
• Net debt of $8.53 billion is up from $7.4 billion in Q1 last year

Guidance:

• Now expects growth in full-year revenues of between 6% and 9%, up from a previous 4.5-7.5%
• Now expects full-year adjusted profit (EBITDA) of between $4.92 and 5.12 billion, up from a previous $4.85-5.05 billion

Chief executive Brendan Horgan said:

“I am proud of the team’s efforts in driving strong execution across all aspects of the business which delivered record first quarter results. Our performance was underpinned by disciplined execution and strong demand across a diverse range of end markets.

“As we look toward the balance of fiscal 2027, we are seeing strong momentum throughout top-line and bottom-line performance. We believe Sunbelt is well positioned for a year of strong performance.”

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ii round-up:

Sunbelt Rentals Holdings Inc (NYSE:SUNB) today detailed sales and profit that beat Wall Street forecasts, enabling the company formerly known as Ashtead Group to lift annual profit expectations.

Exposure to this summer's football World Cup and the previous $650 million acquisition of temporary buildings hire company Aries, helped push first-quarter revenues up 11% to $3.12 billion. Adjusted profits (EBITDA) rose 8.7% to $1.32 billion.

Sunbelt now expects full-year EBITDA of as much as $5.12 billion, up from a previous $4.85-5.05 billion estimate.

Shares in the now US stock market listed company rose over 10% in US trading having come into this latest news little changed year-to-date. Rival United Rentals Inc (NYSE:URI) is up by a quarter during that time. The S&P 500 index has risen by 12% year-to-date.

Sunbelt rents out a full range of construction, industrial, lighting and emergency power generating equipment across both North America and the UK.

Sales relating to North American Speciality equipment rose 25% during the quarter, up from gains of 15% in Q4 and 4% in Q3. General Tool hires for the region climbed 7%, improving from gains of 4% and 2% in the prior two quarters.

Demand came from a diversity of end customers including builds for mega projects, requirements for energy and live events, as well customers of all sizes.

UK sales fell 1% on a currency adjusted basis, down from no change in Q4, but improving from a fall of 4% in Q3.  

A quarterly dividend of $0.30 per share is payable to eligible shareholders on 2 October. A payment made quarterly replaces the previous semi-annual dividend.  

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results. Second-quarter numbers are likely to be announced mid-December.

ii view:

Sunbelt rents out more than one million items of equipment to over 900,000 different customers. Items that can be rented include aerial platforms, air compressors, heaters, lighting, water pumps and crowd control barriers. Geographically, the US accounted for 85% of sales over its last financial year to late April. That was followed by the UK at 8% and Canada the balance of 7%.

For investors, events outside of management’s control such as strikes, customer bankruptcies and even the weather given it can help with the aftermath of hurricanes, can impact demand. Elevated US government debt could at some point see expenditure on mega projects reduced. A leverage ratio of 1.8 times is up from 1.6 times a year ago, while bolt-on acquisitions such as that for Aries are not without risk.

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To the upside, accelerating growth for the group’s core US market has been seen. Diversity of both customer and geographical location exist. Bolt-on acquisitions continue to assist growth, while a forecast dividend yield of around 1.7% is better than mothing.

In all, and despite ongoing risks, this giant of the hiring world continues to justify its place in many already diversified investor portfolios.

Positives:

• Product and customer diversity
• Progressive dividend payment

Negatives:

• Tough economic backdrop
• High dependency on US business

The average rating of stock market analysts:

Hold