Why Is Ryder (R) Down 12.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Ryder (R). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ryder due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ryder's Q3 Earnings & Revenues Beat
Ryder System’s third-quarter 2018 earnings (excluding 4 cents from non-recurring items) of $1.64 per share surpassed the Zacks Consensus Estimate of $1.63. The bottom line also increased significantly year over year. Results were aided by higher revenues and lower tax rates.
Total revenues came in at $2,158.1 million, above the Zacks Consensus Estimate of $2,110.7 million. The top line also improved year over year with growth across all segments. As the company is investing significantly on its lease and rental fleets, capital expenditures (net) during the first nine months of the year soared more than 64% to $2.3 billion. On a year-to-date basis, operating cash flow totaled $1.21 billion, up 3.4%.
Segmental Results
Fleet Management Solutions (FMS): Total revenues amounted to $1.34 billion, up 12% year over year. Operating revenues (excluding fuel) summed $1.12 billion, up 9% year over year. Increase of 19% and 6%, each in commercial rental and ChoiceLease revenues, drove this segmental performance.
Dedicated Transportation Solutions (DTS): Total revenues summed $341 million, up 25% from the year-ago quarter. Operating revenues (excluding fuel and subcontracted transportation) rose 12% to $222 million on the back of volume growth among other factors.
Supply Chain Solutions (SCS): Total revenues were $629 million, up 29% year over year. Operating revenues (excluding fuel and subcontracted transportation) improved 23% year over year to $463 million. Segmental results were boosted by volume growth and the acquisition of MXD Group, completed in April this year.
Liquidity
The company exited the third quarter with cash and cash equivalents of $60.7 million compared with $78.3 million at the end of 2017. The company had total debt of $6,283.1 million compared with $5,409.7 million at 2017 end.
Q4 & 2018 Outlook
For the fourth quarter, Ryder expects adjusted earnings per share of $1.75-$1.85. For the full year, the company anticipates adjusted earnings per share of $5.72-$5.82. Previous view was in the range of $5.62-$5.82. The company reported earnings per share of $4.53 in 2017. This raised guidance can be attributed to the company’s expectations of healthy improvements in rental, supply chain and dedicated businesses.
The company’s projection for ChoiceLease fleet growth remains unaltered at 8,500 vehicles for 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Ryder has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Ryder has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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