North American rental market strengthens Ashtead Group earnings

Equipment rental companies continue to grow in the North American market, as interest rates and infrastructure projects bolster the rental space. 

The Ashtead Group, which owns equipment rental company Sunbelt Rentals, added 113 locations, including 66 greenfields and 47 acquisitions, through its fiscal year 2024 ended April 30, as rental revenue and used equipment sales grew year over year, according to its earnings presentation. 

During fiscal 2024, Sunbelt Rentals reported: 

• Global rental revenue rose to $9.6 billion, up 10.7% YoY; 
• U.S. rental revenue increased to $8.3 billion, up 10.9% YoY; 
• Global used equipment sales grew to $858.8 million, up 36.9% YoY; 
• U.S. used equipment sales grew to $741.4 million, up 38.9% YoY; 
• Last-12-month dollar utilization dropped to 58%, down 300 basis points (bps) YoY. 

Activity in the United States equipment rental market appears set to bolster Sunbelt Rentals and the industry going forward, Ashtead Chief Executive Brendan Horgan said during the company’s earnings call today.  

“The business delivered another year of record revenue and operating profit driven by strength in our North American end markets, the ongoing momentum and execution in our business, and the very clear structural progression being realized in our industry,” he said. “The structural growth story this will continue to be is really the structural progression that is so evident today.” 

Rental industry growth 

Sunbelt Rentals’ growth comes as the rental industry continues to take market share from owned equipment, Horgan said. 

“This has been happening for decades, and there’s every reason to believe that this will continue to happen,” he said. “Second, which is relatively new in terms of how this is expressed, or how it’s talked about: Our customers have built their businesses around relying on us in an essential manner.” 

The rental industry topped $41 billion in rental volume in 2023, up 15.8% YoY, according to the Rental Equipment Register 100, a list of the top 100 rental companies. The top 10 rental companies, which include Sunbelt Rentals, totaled $31.1 billion in 2023, up 16.3% YoY. 

The growth occurred despite the persistence of the high-interest-rate environment, Horgan said. 

“Rental revenue has been driven by a combination of volume growth and rate improvement in end markets, which continue to be strong despite the impacts of inflation, and the higher interest rate environment,” he said. “The rate piece continues to be an important part of the equation, given the cost that we face, whether it be interest costs or the impact of inflation among both our rental fleet and our operating cost base.”

Market impact 

Shares of Ashtead Group (OTCMKTS: ASHTY) were down 0.76% or $2.14 from market open to $278.30 as of market close today. Ashtead Group has a market capitalization of $30.55 billion.

As a result of the company’s fiscal 2024 performance and current expectations of the market, Ashtead Group issues the following rental revenue guidance for fiscal 2025, according to the earnings presentation: 

• U.S. rental revenue guidance of 4% to 7% growth YoY; 
• Canada rental revenue guidance of 15% to 19% growth YoY; and 
• Global rental revenue guidance of 5% to 8% growth YoY. 

The continued development of mega projects and infrastructure projects also contributes to the expected growth of the industry, Michael Pratt, chief financial officer of Ashtead Group, said during the company’s earnings call.