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BMO On Rush Enterprises: Sticking With Outperform Rating, Raising Price Target

RUSHA | August 1, 2016

On Tuesday, Rush Enterprises, Inc. (NASDAQ: RUSHA) reported Q2 EPS of $0.27, in line with estimates, while reporting revenues of $1.026 billion vs. $1.1 billion estimates.

BMO Capital's Take

BMO Capital's Joel Tiss raised Rush Enterprises' price target from $20.00 to $25.00, while maintaining the company's Outperform rating following the company's guidance.

Tiss applauded Rush management's expectations for the rest of 2016, which is "likely to see revenue and profitability similar to current run rates with some possible incremental weakness due to fewer selling days from the leap year."

As a result of the guidance, Tiss raised his 2016 EPS target from $1.00 to $1.13, while marginally increasing his 2017 forecast from $1.25 to $1.30.

Cost Cutting

"This progression allows for the significant cost-reduction efforts now under way at the company to flow through while also providing more time for any snapback related to the disruption of the company's footprint reduction as well as general weakness in various end markets," said Tiss.

On Path To Double In Share Price

"The shares have bounced hard off of the $15-trough level, and we peg cyclical peak EPS at $4.50-plus by 2020–2022, which should be enough to see a doubling of the share price while assuming little to no recovery."

Lower costs and an "increasingly robust parts effort" are the main drivers of the profit increase in the out years.

Management believes the company could double the business in size over the next five years which Tiss believed was closer to a 60 to 70 percent five-year growth goal realistically.

At the time of writing, Rush Enterprises traded at $23.17, up 0.83 percent Monday.

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