Why Ritchie Bros. Auctioneers Is up Over 5%

Ritchie Bros. Auctioneers (TSX:RBA)(NYSE:RBA), the world’s largest industrial equipment auctioneer, announced better-than-expected second-quarter earnings results after the market closed yesterday, and its stock has responded by rallying over 5% in early trading. Let’s break down the quarterly results and the fundamentals of its stock to determine if we should consider buying in to this rally or wait for it to subside.

A quarter of mixed growth

Here’s a quick breakdown of six of the most notable statistics from Ritchie Bros.’s three-month period ended on June 30, 2017, compared with the same period in 2016:

Metric Q2 2017 Q2 2016 Change
Gross auction proceeds US$1,257.43 million US$1,275.68 million (1.4%)
Revenues US$166.19 million US$158.81 million 4.6%
Revenue run rate 13.22% 12.45% 77 basis points
Adjusted operating income US$51.06 million US$53.64 million (4.8%)
Adjusted net income US$36.44 million US$39.71 million (8.2%)
Diluted adjusted earnings per share (EPS) US$0.33 US$0.37 (10.8%)

What should you do with Ritchie Bros. now?

It was a good quarter overall for Ritchie Bros. given the additional expenses it faced as a result of acquisitions, and the results easily beat the consensus estimates of analysts polled by Thomson Reuters, which called for adjusted EPS of US$0.31 on revenue of US$163.4 million, so I think the rally in its stock is warranted.

Even after the +5% pop, Ritchie Bros.’s stock is still down over 14% year to date and more than 27% below its 52-week high reached in December 2016, so I think this could be the start of a sustained rally higher as investors get more bullish on the stock. It also helps that the stock trades at attractive forward valuations, including just 23.8 times fiscal 2018’s estimated EPS of US$1.20, and it has a great dividend with a current yield of about 2.4% and a streak of annual dividend increases that will reach 14 this year.

With all of the information provided above in mind, I think Foolish investors seeking exposure to the industrial industry should consider initiating positions in Ritchie Bros. today.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.

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