Stifel Upgrades Ryder, Old Dominion To Buy: Here's Why

In separate reports published Monday, Stifel analyst David G. Ross upgraded the ratings on Ryder System, Inc. R and Old Dominion Freight Line ODFL from Hold to Buy. The price targets were set at $104 and $80, respectively.

• Ryder System

Analyst David Ross said that the underlying US “should resume growth” after the inventory destock. Ryder is among the main players in the commercial truck rental, leasing, and maintenance space. About 50 percent of the market is controlled by Ryder and Penske Automotive Group, Inc. PAG, while the remaining market is shared by a few small regional and local competitors.

In the report Stifel noted, “With a trend to outsourcing of equipment procurement (trucks are more expensive), maintenance (engines are more technical and harder to maintain), and private fleet management (drivers are hard to find and regulations are increasing), we believe Ryder is well positioned to grow market share and benefit from network leverage.”

• Old Dominion

Ross believes that the recent pullback in less-than-truckload (LTL) stocks was “beginning to present a buying opportunity for some.” Channel checks indicated that freight volumes had been soft during 2Q, which has traditionally been a strong quarter. The weakness was magnified by weak manufacturing exports, a rise in inventory build and deceleration in the domestic energy economy.

“On the other hand, channel checks also indicate that core pricing remains stable in the low-to-mid-single digit range, and that long-term industry fundamentals remain intact,” the report added.

Ross believes that Old Dominion was at “buyable levels” and would become more attractive in the mid-$60s “were it to fall down on a 2Q15 miss or broader market sell-off, all else equal.”