Ryder Beats on Q1 Earnings, Up Y-O-Y - Analyst Blog

Ryder System Inc. R, one of the world's largest providers of integrated logistics and transportation solutions, reported first-quarter 2014 adjusted earnings of 92 cents per share. The bottom line surpassed the Zacks Consensus Estimate of 87 cents and escalated 16% from 79 cents in the year-ago quarter driven by growth in the Fleet Management Solutions segment.

The company registered revenues of $1,610.7 million in the first quarter, up 3% year over year but below the Zacks Consensus Estimate of $1,628 million.   

Operating revenues (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 4% year over year to $1,322.5 million. The growth was driven by increased full service lease revenues and commercial rental revenue. In addition, growth in new business and higher volumes in Supply Chain Solutions also supported revenue growth.

Segment Results

Fleet Management Solutions: Total revenue increased 3% year over year to $1.14 billion in the first quarter buoyed by 10% growth in commercial rental revenues. Operating revenues moved up 4% year over year to $859.9 million.

Supply Chain Solutions: Total revenue was $597.3 million, up 4% from the year-ago period. Operating revenues (excluding subcontracted transportation) grew 5% year over year to $520.4 million. The growth was driven by higher volumes and business wins.

Liquidity and Capital Expenditure

Ryder System ended the year with cash and cash equivalents of $72.8 million compared with $61.6 million at year-end 2012. The company had long-term debt of $ 4,045.8 million, representing leverage ratio of 234%. Cash from operations was $238 million, down 4.4% year over year due to increased working capital outflows. Net capital expenditure amounted to $468 million versus $336 million in the year-ago quarter.

Guidance

For the second quarter of 2014, the company expects earnings in the range of $1.35 to $1.40 per share. For 2014, Ryder maintains earnings per share estimate of $5.30 to $5.45, up 9% to 12% from $4.88 per earned in 2013.

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 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 to consider in this sector include Trinity Industries Inc. TRN, American Railcar Industries, Inc. ARII and CAI International Inc. CAP. While Trinity Industries and AmericanRailcar boast a Zacks Rank #1 (Strong Buy), CAI Internationalholds a Zacks Rank #2.