Company Reports

Shares of narrow-moat-rated RB Global moved higher on Aug. 6 after the market digested the firm’s second-quarter earnings results and revised 2024 guidance. Total revenue of $1.1 billion fell roughly 1% year over year and missed the FactSet consensus estimate by roughly 3%. Nevertheless, adjusted EBITDA margin expanded 350 basis points year over year to 31.2%, and adjusted EPS of $0.94 was about 8% above the consensus estimate. After updating our valuation model for management’s revised guidance, we’ve maintained our $57 per share estimate for New York Stock Exchange-listed shares. We’ve increased our fair value estimate for Toronto Stock Exchange-listed shares about 1% due to a modestly higher USD/CAD exchange rate.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global reported first-quarter earnings ahead of our expectations. We increased our fair value estimate by 5% to $57 per share, up from $54. The increase was attributable to the time value of money and our higher near-term sales and margin expectations. In 2024, we project sales to increase by nearly 5% year on year while the operating margin expands by 260 basis points to 15.4%.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global reported solid fourth-quarter earnings. However, we still lowered our fair value estimate by 3% to $54 from $56 per share, as we lowered our 2024 sales expectations for IAA. The company’s shares were up approximately 8% in intraday trading, following its earnings update. We believe the market reacted positively to RB Global beating FactSet consensus earnings per share estimates in the quarter, while sales came in roughly close to consensus estimates.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe RB Global will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, RB Global drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

RB Global reported solid third-quarter earnings, but the loss of customers at IAA led us to temper our near-term sales expectations. As a result, we lowered our fair value estimate to $55 from $57. Management commented that the customer loss made up roughly 4% of total gross transaction value annually and approximately 5% of total unit volumes.

In its early earnings announcement on Aug. 2, RB Global shared its CEO, Ann Fandozzi, would be departing. The company’s stock traded down approximately 4% on Aug. 2. The two sides could not come to an agreement with respect to compensation. According to the company’s press release, the former CEO was looking for more front-load compensation that would have brought forward five years of equity compensation. The board contends the compensation structure would have been beyond peer group compensation benchmarks.

Ritchie Bros. provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe Ritchie Bros. will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, Ritchie Bros. drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

We elected to leave our $58 fair value estimate for Ritchie Bros. unchanged, given first-quarter earnings were in line with our expectations. The company’s shares also trade on the Toronto Stock Exchange, and recent movements in the USD/CAD exchange rate led us to reduce our fair value estimate for Canadian shares, which is now CAD 78 (down from CAD 79.50 previously). Overall, we view Ritchie Bros.’ shares as fairly valued.

Ritchie Bros. provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe Ritchie Bros. will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, Ritchie Bros. drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

Ritchie Bros. provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe Ritchie Bros. will continue to be the top player in the industrial asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, Ritchie Bros. drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

On March 14, Ritchie Bros.' shareholders approved the company's acquisition of IAA. We're maintaining our $51 fair value estimate, but increasing our fair value on Canadian shares to CAD 70 from CAD 69 previously due to currency movements since our last update.

Ritchie Bros. provides auction and marketplace services for used heavy equipment. The company’s strong auction liquidity attracts both buyers and sellers to its network. We believe Ritchie Bros. will continue to be one of the top players in the asset disposition market. The network effects present in its business have consistently delivered higher average selling prices for consignors (or sellers) and provided buyers a wide range of equipment to choose from. For both parties, Ritchie Bros. drives significant amount of value, which has allowed it to monetize its network effects and develop a strong competitive positioning.

On March 10, media reports showed that a majority of Ritchie Bros.’ shareholders voted to approve the IAA acquisition. While these are preliminary results, we expect the final confirmation at the March 14 shareholder vote to show the same results. That said, the preliminary results show that 46% of voters were against the deal, which is more than we initially expected. Following the initial deal announcement, our view was that the deal would eventually close but would likely be contested by a small number of shareholders. Our main concern then was around the declining market share at IAA following the loss of a large insurance customer. IAA’s weakened catastrophic event response was the key factor to the large insurance player pivoting away from IAA. However, we think Ritchie Bros.’ yard footprint in Texas and Florida can help improve IAA’s catastrophic event business in the near term. On the other side, we think IAA’s yard footprint will help Ritchie Bros. drive greater transaction volume.

Ritchie Bros. ended the year on a solid note, showing resiliency amid a tight equipment supply market. A key metric for auction players is gross transaction value, or GTV, which shows how much value Ritchie Bros. brings to sellers. For the full year, GTV increased 9% year on year to $6.0 billion. In economic upswings, equipment owners sell their aging equipment for newer machines, which, in turn, brings more volume to Ritchie Bros.’ auctions. We continue to see improvements in the supply chain across the heavy equipment space, giving us confidence that Ritchie Bros. will see increasing demand in the near term.