On September 15, RB Global (NYSE:RBA) said it is lifting its buyback ceiling to $1 billion from $500 million. Buybacks make for easy headlines, but the story underneath is more interesting. In the second quarter, diluted earnings per share rose 34% on a reported basis and only 6% on an adjusted one. That gap is worth understanding before you decide what this authorization really means.
Growth With A Buyback Kicker
The buyback is not a one-off gesture. RB Global started the program on March 18, and by September 11, it had bought back 5,363,497 shares, paying an average of about $93.22. The new terms, effective September 17, let it repurchase the lesser of 14,224,129 shares, roughly 10% of the public float, and $1 billion of stock. Management also raised the quarterly dividend to $0.33 from $0.31 on July 21. The company itself calls buying shares at certain prices an attractive use of its funds, and it is now putting more money behind that view.
The business is giving that buyback something to stand on. On August 4, RB Global reported second-quarter GTV up 11% to $4.7 billion, with Automotive leading as unit volumes rose 11% on net market share gains. Net income climbed 31% to $143.6 million, so profit is growing faster than sales, which is what you want from a company returning cash. Management then lifted its full-year GTV growth outlook to 9% to 11% from 6% to 9%.
Where The Growth Gets Thin
Start with how much of that growth was bought. Strip out recent acquisitions, and GTV growth falls to 7% from 11%. Service revenue grew only 5% to $933.4 million, well behind GTV, because the take rate, the share of GTV kept as service revenue, slid 110 basis points to 20%. Management blames acquired businesses with lower take rates and automotive pricing incentives tied to higher volumes. Heavy equipment and transportation looks softer still: its GTV rose 8%, mostly from acquisitions, while customers grew cautious and transaction volumes slipped.
Earnings quality is the second problem. Reported diluted earnings per share of $0.71 grew 34%, while adjusted earnings per share of $1.13 grew 6%. That is a wide gap between the two ways of counting. The company credits higher operating income and lower interest expense for the bigger reported gain, and lower interest is not the same thing as a faster core business. And the buyback carries no guarantee: RB Global says it may stop purchases at any time and cannot promise how many shares it will retire.
Funds Leave, Shorts Linger
Hedge fund ownership slipped to 37 funds from 41. That is a small but real trim in institutional conviction, arriving as the company itself steps up its buying. Short interest stands at 10.54% of the float, which is heavy skepticism and carries squeeze risk if the news turns favorable. The forward P/E of 17.01 prices, as of September 18, in steady earnings growth rather than heroics. That sits oddly beside departing funds and a large bear camp.
What Has To Go Right
The bigger buyback says management likes its own stock. It does not answer the harder question of how fast the business grows once acquisitions are set aside. Bulls need organic momentum to catch up with the headline numbers, aided by heavy equipment customers who stop holding back. Bears will keep pointing at a thinning take rate and single-digit adjusted growth. Until one of those camps gets proof, the authorization is a ceiling rather than a promise.
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