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Ryder System, Inc. (R)

R

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We have downgraded our recommendation on Ryder System, Inc. (R) to Underperform from Neutral. Despite the company's strong performance in the first quarter, the company slashed its near-term earnings and revenue estimates.

The company foresees lower demand trend in some of its product lines and also expects compensation expenses to increase, given higher medical benefit costs. Amid ongoing economic uncertainties, the company has continued to invest in its fleet management solutions, which is also weighing on its liquidity position and increasing debt obligations.

Moreover, stiff competition from peers could interrupt the near-term growth trajectory of the company. Hence, we have an Underperform recommendation on the stock with a target price of $31, based on 8.3x our earnings estimate for 2012.

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