Analysts Boost Ritchie Bros.' Price Target

The U.S. housing meltdown may be drowning anyone trying to build homes or sell forest products, but it’s got the fast-talkers at Ritchie Bros. Auctioneers (RBA/TSX) bobbing high.

The Surrey, B.C.-based heavy equipment auctioneer posted third-quarter earnings per share of $0.42, far outstripping RBC Capital Markets estimates of $0.34, and earning it an RBC recommendation upgrade to “outperform” from “sector perform.”

The reason, analyst Cynthia Houlton wrote in a report Wednesday, is that slack demand for U.S. housing has created an awful lot of parked equipment that owners need to get rid of, a trend that should intensify auction supply through 2008.

She wrote that,

As the company builds its marketplace for used industrial equipment, a larger set of buyers from non-U.S. locations are filling demand gaps, utilizing a weak U.S. dollar to make equipment purchases and helping to create larger auctions that create scale/margin benefits.

In the past quarter, Ritchie posted gross auction sales of $667.6-million, fully 10% ahead of its market guidance of $600-million. (The company reports all figures in U.S. dollars.)

And future sales also appear likely to beat expectations as continuing U.S. housing woes create gilded auctions for Ritchie, Ms. Houlton wrote, as she boosted her 12-month share target to $80 from $72.

Not everyone is quite as optimistic, however. Blackmont Capital analyst Avi Dalfen noted Ritchie Bros.’ “outstanding” quarter, with 54% year-over-year earnings growth, and the potential for further future growth as the company adds three new permanent auction sites. But in a note to investors Wednesday, he maintained his “buy” recommendation, and made a more modest adjustment to his share target, boosting it from $75.50 to $77.75.