Ryder System Inc. (R), one of the world's major providers of integrated logistics and transportation solutions, reported third-quarter 2014 earnings per share of $1.63. The bottom line was on par with the Zacks Consensus Estimate of $1.63 and escalated 12% from $1.46 in the year-ago quarter driven by growth in the Fleet Management Solutions segment.
The company registered revenues of $1,687.2 million in the third quarter, up 3.2% year over year but below the Zacks Consensus Estimate of $1,717 million.
Operating revenues (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 5% year over year to $1,415.9 million. The revenue growth came on the back of higher commercial rental revenues, increased full service lease revenues and new business wins along with volume expansion in Supply Chain Solutions.
Segment Results
Fleet Management Solutions: Total revenue increased 4% year over year to $1,186.9 million in the third quarter buoyed by 11% growth in commercial rental revenues. Meanwhile, operating revenues moved up 7% year over year to $931.9 million.
Supply Chain Solutions: Total revenue stood at $617.8 million, up 1% from the year-ago quarter. Operating revenues (excluding subcontracted transportation) grew 3% year over year to $545 million. The growth was driven by higher volumes and business wins, in areas like industrial goods, consumer packaged goods and retail along with the technology industry.
Liquidity and Capital Expenditure
Ryder System ended the year with cash and cash equivalents of $75 million compared with $61.6 million at end-2013. The company had long-term debt of $4,045.2 million against 3,930 million at the end of fiscal 2013. Cash from operations was $974.7 million at the end of first nine months of 2014 against $890 million in the same period last year. Net capital expenditure amounted to $1.7 billion at the end of first nine months of 2014 versus $1.5 billion in the same period last year.
Guidance
For the fourth quarter of 2014, the company expects earnings in the range of $1.56 to $1.61 per share. For 2014, Ryder raised its earnings per share estimate to $5.55–$5.60 per share, up from the previous estimate of $5.50 to $5.60 per share.
Recommendation
We believe that the company’s growth trajectory hinges on improvement in lease fleet and used vehicle sales. Further, Ryder is experiencing an improvement in fleet age, implying further renewals and organic fleet growth. In addition, the company’s efforts toward deploying a fuel-efficient fleet will help strengthen its foothold in the rapidly growing market of 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 #3 (Hold).
Other better-ranked stocks in this sector include American Railcar Industries, Inc. (ARII), FLY Leasing Limited (FLY) and Aircastle LTD (AYR). All three carry a Zacks Rank #2 (Buy).
(We are reissuing this article to correct a mistake. The original article, issued earlier today, Oct. 22, 2014, should no longer be relied upon.)
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