Ryder System Inc. (R), one of the world's largest providers of integrated logistics and transportation solutions, reported fourth quarter 2013 adjusted earnings of $1.35 per share. The bottom line surpassed the Zacks Consensus Estimate of $1.29 and escalated 7% from $1.26 in the year-ago quarter. Improved performance by Supply Chain Solutions and Fleet Management Solutions segments were the main growth drivers.
For 2013, the company registered earnings of $4.88, up 11% year over year.
The company registered revenues of $1,617.7 million in the fourth quarter, up 2% year over year but below the Zacks Consensus Estimate of $1,643 million. For the full year, Ryder reported total revenue of $6.4 billion, up 3% year over year.
Operating revenues (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 4% year over year to $1,344.7 million thanks to business wins and volume growth in Supply Chain Solutions as well as growth in full service lease and commercial rental revenues. For 2013, operating revenue was $5.3 billion, up 4% year over year.
Segment Results
Fleet Management Solutions: Total revenue increased 2% year over year to $1.14 billion in the fourth quarter buoyed by 6% growth in commercial rental revenues. Operating revenues moved up 3% year over year to $875.7 million.
Supply Chain Solutions: Total revenue was $598.7 million, up 4% from the year-ago period. Operating revenues (excluding subcontracted transportation) grew 8% year over year to $525.9 million. The growth was driven by higher volumes and business wins.
Liquidity and Capital Expenditure
Ryder System ended the year with cash and cash equivalents of $61.6 million compared with $66.4 million at year-end 2012. The company had long-term debt of $3,930 million, representing leverage ratio of 221%. Cash from operations was $1.2 billion, up 8% year over year. Net capital expenditure amounted to $2.18 billion versus $2.16 billion in 2012.
Guidance
For the first quarter of 2014, the company expects earnings in the range of 83–88 cents per share, representing 2–9% growth year over year. For 2014, Ryder expects earnings per share of $5.30 to $5.45, up 9% to 12% from $4.88 per earned in 2013.
Full-year 2014 total revenue is expected at approximately $6.8 billion, up 5% year over year. Operating revenue (revenue excluding FMS fuel and all subcontracted transportation) is estimated at approximately $5.6 billion, up 6% year over year in 2014.
Recommendation
We believe the company’s growth trajectory hinges on improvement in lease fleet and used vehicle sale. Further, Ryder is experiencing an improvement in fleet age, implying further renewals and organic fleet growth. In addition, the company’s efforts in deploying a fuel-efficient fleet remain industry leading and strengthen its foothold in the rapidly growing market for environmentally friendly vehicles.
Despite these positives, the company faces certain headwinds that may limit its near-term growth. These include unstable economic conditions, heavy capital expenditures, stiff competition and federal regulations.
Ryder System currently has a Zacks Rank #2 (Buy). Other stocks to consider in this sector include GATX Corp. (GMT), Trinity Industries Inc. (TRN) and American Railcar Industries, Inc. (ARII). While GATX and Trinity Industries boast a Zacks Rank #1 (Strong Buy), American Railcar holds a Zacks Rank #2 (Buy).
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