On May 25, 2015, we issued an updated research report on integrated logistics and transportation solutions provider, Ryder System, Inc. R.
The Miami, FL-based company performed impressively in the first quarter of 2015 reporting better-than-expected earnings. The bottom line outpaced the Zacks Consensus Estimate of $1.01 by 7 cents and escalated 17.4% from the 92 cents per share recorded in the year-ago quarter.
Following the earnings beat – the third one in the last four quarters – this Zacks Rank #2 (Buy) stock raised its full year 2015 EPS guidance. The company now expects earnings per share in the range of $6.40–$6.55 (previous guidance: $6.25–$6.40). Capital expenditures are now expected to increase to $2.63 billion, up from the previously estimated $2.55 billion. For the second quarter of 2015, the company expects earnings in the range of $1.58 to $1.63 per share. The Zacks Consensus Estimate for the quarter currently stands at $1.61 per share, within the company’s guidance.
We note that earnings estimates for Ryder System are exhibiting a healthy uptrend following the strong first quarter results. Over the last 60 days, the 2015 Zacks Consensus Estimate of earnings has gone up 13 cents to $6.49 per share on the back of upward revisions by 7 analysts. Likewise, the estimate for 2016 has moved north by 12 cents over the same time frame to $7.29 per share. The long-term expected earnings per share growth rate is pegged at a healthy 15%.
The company expects demand in Full Service Lease and solid performance in Commercial rentals along with on-demand maintenance initiatives to drive growth. Further, the Supply Chain business is expected to grow on the back of strong new sales and rise in customer volumes.
Moreover, the company’s efforts in deploying a fuel-efficient fleet will help strengthen its foothold in the rapidly growing market of environmentally friendly vehicles. Further, we believe Ryder’s strategic acquisitions, coupled with a favorable lease rate environment, should deliver strong results for the company, going forward. We are also encouraged by Ryder’s commitment to reward its shareholders through share buybacks and dividend payments.
In view of the above positives, we believe there is significant scope for stock price appreciation at Ryder in the near term.
Other Stocks to Consider
Apart from Ryder, investors interested in the transportation sector may also consider stocks like American Railcar Industries, Inc. ARII, Greenbrier Companies GBX and Knight Transportation Inc. KNX. All the three stocks carry a Zacks Rank #1 (Strong Buy).
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