Ryder Earnings Beat on Unit Performance

Zacks

Ryder System Inc. (R), one of the world's largest providers of integrated logistics and transportation solutions, reported mixed second quarter 2013 results. Quarterly adjusted earnings were $1.25 per share, which surpassed the Zacks Consensus Estimate of $1.22 and escalated 15.0% from $1.09 in the year-ago quarter. The year-over-year growth was driven by better performances across lease, commercial rental and supply chain units.

The company registered revenues of $1,604 million in the second quarter, missing the Zacks Consensus Estimate of $1,611 million. Comparing year over year, revenues improved 3.0% from $1,564 million.

Operating revenue (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 4% year over year to $1,313 million, supported by full service lease growth plus expansion of business in the Supply Chain Solutions segment.

Segment Results

Fleet Management Solutions: Total revenue increased 2% year over year to $1,121 million in the second quarter buoyed by higher Contract-related maintenance and Full Service lease revenues that increased 12% and 4%, respectively. Operating revenue for the segment moved up 3% year over year to $853 million.

Supply Chain Solutions: The segment includes operational activities of the company’s Dedicated Contract Carriage business. Total revenue was $597 million, up 5% from the year-ago period. Operating revenue (excluding subcontracted transportation) grew 6% year over year to $515 million. The growth was primarily backed by higher new business sales.

Liquidity and Capital Expenditure

Ryder System ended the reported quarter with cash and cash equivalents of $73 million compared with $66 million at year-end 2012. The company had long-term debt of $3,656 million, representing debt-to-equity ratio of 253%. Cash from operations was $564 million, while net capital expenditure amounted to $760 million.

Guidance

For 2013, Ryder revised its earnings estimate to $4.75–$4.85 per share from $4.70–$4.85 guided previously. For the third quarter, the company estimates earnings at $1.41 to $1.46 per share.

Recommendation

Ryder System continues to benefit from favorable industry fundamentals along with improved average fleet age, prospects in rental business and better financials. The company also targets capturing more market share by deploying a fuel-efficient fleet and enhanced services.

Despite the positives, the company faces certain headwinds that may limit its near-term growth potential. These include unstable economic conditions, heavy capital expenditures, stiff competition and federal regulations.

Ryder System operates with the likes of American Railcar Industries Inc. (ARII), FLY Leasing Ltd (FLY) and The Greenbrier Companies Inc. (GBX). The stock presently holds a Zacks Rank #4 (Sell).

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