Ryder System Inc. (R), one of the world's largest providers of integrated logistics and transportation solutions, reported second-quarter 2014 adjusted earnings of $1.44 per share. The bottom line surpassed the Zacks Consensus Estimate of $1.39 and escalated 15% from $1.25 in the year-ago quarter driven by growth in the Fleet Management Solutions segment.
The company registered revenues of $1,684.6 million in the second quarter, up 5% year over year and also above the Zacks Consensus Estimate of $1,677 million.
Operating revenues (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 6% year over year to $1,393.0 million. The revenue growth was based on higher commercial rental revenues, full service lease revenues and new business wins along with volume expansion in Supply Chain Solutions.
Segment Results
Fleet Management Solutions: Total revenue increased 5% year over year to $1.18 billion in the second quarter buoyed by 13% growth in commercial rental revenues. Operating revenues moved up 6% year over year to $907.9 million.
Supply Chain Solutions: Total revenue was $627.6 million, up 5% from the year-ago period. Operating revenues (excluding subcontracted transportation) grew 6% year over year to $545.4 million. The growth was driven by higher volumes and business wins, in areas like industrial goods, consumer packaged goods and retail along with technology industry.
Liquidity and Capital Expenditure
Ryder System ended the year with cash and cash equivalents of $86.9 million compared with $61.6 million at year-end 2013. The company had long-term debt of $ 4,159.5 million, representing leverage ratio of 240%. Cash from operations was $537 million, down 4.8% year over year due to increased working capital outflows. Net capital expenditure amounted to $1.2 billion versus $948 million in the year-ago quarter.
Guidance
For the third quarter of 2014, the company expects earnings in the range of $1.58 to $1.63 per share. For 2014, Ryder raises earnings per share estimate to $5.50 to $5.60 per share, up from the previous estimate of $5.40 to $5.55 per share.
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 help 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.
Zacks Rank and Other Stocks
Ryder System currently has a Zacks Rank #2 (Buy).
Other stocks with Zacks Rank #2 in this sector include FLY Leasing Limited (FLY),The Greenbrier Companies, Inc. (GBX) and CAI International Inc. (CAP). While and Greenbrier boast a Zacks Rank #1 (Strong Buy), CAI Internationalholds a Zacks Rank #2.
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