Barclays has identified Ashtead Group PLC (AHT) as a prominent equity idea for 2026, citing three interrelated reasons that could support the rental equipment group's performance over the coming years.
First, Barclays notes signs that end markets are moving toward recovery, even if the rebound takes longer than earlier anticipated. While United Rentals' outlook for fiscal 2026 assumes that local non-residential construction will stay broadly stable rather than stage an immediate recovery, Barclays points to several forward-looking indicators that suggest improvement is likely to arrive.
Among those indicators, the Dodge Momentum Index - a gauge of planning activity - has reached record highs and, when excluding data-centre activity, has expanded by more than 30% year-over-year across the past five months. Commercial lending has also shown gradual improvement, which Barclays interprets as another supporting signal for a recovery in demand for rental equipment.
Second, Barclays argues there is clear scope for margin improvement in future years. If local volume growth strengthens, Ashtead stands to gain from a better revenue mix and improved rental pricing. Barclays highlights operational efficiencies embedded in the companys Sunbelt 4.0 programme as a concrete source of margin leverage. Elements of that programme cited include smarter dispatch routing, wider use of equipment telematics, and investment in market repair centres - all aimed at reducing costs and improving fleet utilisation.
On margins, Barclays models 25% EBITA margins by fiscal 2029. The bank also observes that returning to the pre-Covid margin level of 28% would equate to roughly 20% upside to group adjusted EBITA versus its current projection, illustrating the potential scale of profit recovery if the business fully regains prior efficiency and pricing dynamics.
Third, Barclays sees valuation appeal in Ashtead today, drawing attention to the enterprise value to original equipment cost (EV/OEC) ratio. Historically, Barclays notes that purchasing Ashtead shares when returns on invested capital are near troughs has been a successful investment approach. The bank believes that ROIC is beginning to trend upward in 2026 while the EV/OEC multiple remains depressed, creating a potentially favorable entry point.
Barclays also lists imminent corporate catalysts that could influence sentiment and provide additional information for investors. Sunbelt Rentals is scheduled to list on the NYSE and LSE on March 2. Ashtead's third-quarter results are due on March 12; Barclays expects those results to be in line with consensus and sees no change to the fiscal year outlook, with sequential improvement in North America rental revenue anticipated. Management will also host an investor day in New York on March 26, where progress on the Sunbelt 4.0 initiative - launched in April 2024 - is expected to be discussed in detail.
Summary
Barclays highlights three reasons to favor Ashtead into 2026: an improving construction and rental end market signaled by planning indexes and lending flows; margin upside driven by volume recovery and efficiency programmes under Sunbelt 4.0; and a valuation setup where EV/OEC is low while ROIC is beginning to inflect higher. Near-term corporate events - a dual-listing, results and an investor day - offer catalysts for fresh investor insight.
Key points
- End-market recovery signals - Dodge Momentum Index at record highs and improving commercial lending suggest rising demand for rental equipment; impacts construction and equipment rental sectors.
- Margin expansion potential - Sunbelt 4.0 efficiencies plus better local volume and pricing could lift EBITA margins toward Barclays' 25% forecast for fiscal 2029, with upside to pre-Covid levels.
- Attractive valuation metrics - Low EV/OEC amid an upward ROIC trend in 2026 may present a favorable entry for investors focused on capital efficiency and valuation.
Risks and uncertainties
- Timing of recovery - Barclays acknowledges the recovery may take longer than previously expected; slower-than-anticipated end-market improvement would delay margin and revenue benefits, affecting construction and rental markets.
- Execution risk on efficiency programmes - Realising gains from Sunbelt 4.0 depends on operational delivery such as dispatch improvements, telematics rollout and repair-centre benefits; underperformance would constrain margin upside, impacting profit outlook for equipment rental.
- Event-driven volatility - The upcoming Sunbelt dual-listing, quarterly results and investor day could produce short-term share price swings if information differs from market expectations, affecting investor sentiment in the equipment and capital markets sectors.