Analysts at KeyBanc Capital Markets turned bullish on Ryder System, Inc. R after conducting proprietary checks into rental activity. The firm's Todd Fowler upgrades Ryder's stock rating from Sector Weight to Overweight with a newly established $100 price target.
Proprietary checks found that the transportation provider's rental activity is benefiting from improved demand on a year-over-year basis, Fowler commented in the upgrade note. The findings are in-line with broader for-hire trends and weather-related disruptions. In fact, nearly two-thirds of those contacted by the analyst said that utilization in the third quarter so far is higher year-over-year and the overall outlook for the fall season is positive.
Lease commentary was also in-line with expectations as the majority of contacts suggest demand was flat to higher in the third quarter, the analyst added.
Given the favorable findings, Fowler is "incrementally confident" in the company's bottom half of 2017 guidance, which implies an earnings per share of $4.50 at the midpoint. Adjusting for 25–45 cents per share in earnings benefit from reduced valuation adjustments and accelerated depreciation, the analyst now expects the company to earn $5.35 per share which represents an increase from a prior estimate of $5.22 per share.
The analyst's 2018 estimate is also above the current consensus estimate of $5.22 per share in 2018 although the Street's figure still implies a "modest" operational growth of 5–10 percent prior to normalizing rental utilization.
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