JPMorgan downgrades Sunbelt Rentals to Underweight on rising costs

JPMorgan analyst Tami Zakaria downgraded Sunbelt Rentals (SUNB) to Underweight from Neutral with a price target of $75, up from $74. The firm believes the increase in freight rates and fuel costs and the expected outperformance of the company’s specialty unit, which has lower margins than general tool, will offset much of Sunbelt’s gains from easing hauler expense compares. The company needs an acceleration in rental rates for margin expansion, and this will be difficult amid sluggish local market demand and heightened competition, the analyst tells investors in a research note.