Ritchie Bros. Slips After Auction Proceeds Miss Expectations
Ritchie Bros. (RBA) announced on December 23 that it had sold about $4.33B of equipment through its auctions and its online equipment marketplace in 2016. Two research firms reacted negatively to the news today, with Jefferies saying that the results were below expectations and Raymond James downgrading the shares to Market Perform from Outperform. Ritchie Bros auctions industrial equipment.
2% INCREASE: Ritchie Bros' gross auction proceeds increased 2% in 2016, versus 2015, the company noted. "The two percent GAP growth we recorded this year was negatively affected by lower equipment values relative to last year, though lot volume, buyers, consignors and registered bidders all grew substantially from 2015, indicating strong operational growth," said the company's CEO, Ravi Saligram, in a statement.
Q4 RESULTS: Ritchie's Q4 gross auction proceeds fell 9% compared with 2015 to $1B. The company noted that two auctions which occurred in the fourth quarter of 2015 took place in the third quarter this year, negatively affecting the comparison.
ANALYST REACTION: Ritchie's 2016 gross auction proceeds came in about $100M below the expectations of Jefferies analyst Stephen Volkmann, he stated today. The prices of used products, particularly within transports, has been weak, Volkmann reported. He estimated that the company's Q4 earnings per share would come in at 25c, versus the consensus estimate of 32c, and he kept a $32 price target and a Hold rating on the stock. Raymond James analyst Ben Cherniavsky downgraded Ritchie Bros to Market Perform from Outperform. The company's Q4 gross auction proceeds appear set to fall 9% year-over-year, well below Cherniavsky's estimate of a 4% increase, he wrote. The company is being hurt by rising oil prices, and the stock's risk/return ratio has deteriorated after it rose about 40% since January 2015, the analyst stated. He trimmed his price target on the shares to $35 from $42.
PRICE ACTION: In early trading, Ritchie Bros. fell 4.5% to $34.40 per share.
Disclosure: None.