Dump Ryder System (R) from Your Portfolio Now: Here's Why
On Nov 16, 2015, we issued an updated research report on Ryder System, Inc. R – a major provider of integrated logistics and transportation solutions.
The Miami, FL-based company reported lower-than-expected revenues in the third quarter of 2015 mainly due to weakness in its Fleet Management Solutions division – the primary contributor to the company’s top line. Total revenue at the division fell 2% to $1.2 billion. Lower fuel costs passed on to customers hurt segmental results.
In fact, weakness at its Fleet Management Solutions segment had caused the company to trim its 2015 earnings per share guidance a few days before the third quarter earnings release. Full-year earnings are now projected in the range of $6.17 to $6.29 (the previous outlook had called for earnings in the range of $6.45 to $6.55). We are disappointed by the company’s decision to slash its earnings per share outlook. Since the bulk of the revenues at Ryder System is derived from the Fleet Management Solutions division, the segment’s continuous below-par performance will hamper the company’s growth prospects significantly.
Moreover, we are also concerned about the company’s weak balance sheet. The company exited the third quarter of 2015 with nearly $5.5 billion of debt and only $75.4 million of cash and cash equivalents.
Earnings Estimates on the Downswing
The grim outlook for this Zacks Rank #4 (Sell) transportation stock has naturally impacted its earnings estimates adversely. Over the last 60 days, the 2015 Zacks Consensus Estimate of earnings has gone down 25 cents to $6.24 per share on the back of downward revisions by 7 analysts. Likewise, the estimate for 2016 has moved south by 39 cents over the same time frame to $6.90 per share, with 7 analysts slashing their respective earnings estimates for the period.
In view of the above negatives, made worse by downward estimate revisions, we believe there is significant possibility of stock price depreciation at Ryder in the near term. Consequently, we advise investors to avoid the stock for the time being.
Key Picks in the Sector
Not all transportation stocks are performing as badly as Ryder. Some better-ranked players in the sector are SkyWest Inc SKYW, American Railcar Industries, Inc. ARII and Avolon Holdings Limited AVOL. SkyWest sports a Zacks Rank #1 (Strong Buy) while both American Railcar Industries and Avolon Holdings carry a Zacks Rank #2 (Buy).
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RYDER SYS (R): Free Stock Analysis Report
SKYWEST INC (SKYW): Free Stock Analysis Report
AMER RAILCAR (ARII): Free Stock Analysis Report
AVOLON HOLDINGS (AVOL): Free Stock Analysis Report
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