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Ryder System Inc. (R - Analyst Report), one of the world's largest providers of integrated logistics and transportation solutions, reported third quarter 2013 results. Quarterly adjusted earnings were $1.46 per share, which surpassed the Zacks Consensus Estimate of $1.44 and escalated 7% from $1.37 in the year-ago quarter. The year-over-year growth was driven by improved performance by Supply Chain Solutions and Fleet Management Solutions segments.

The company registered revenues of $1,634.5 million in the third quarter, surpassing the Zacks Consensus Estimate of $1,628 million. Comparing year over year, revenues improved 4.0% from $1,573.3 million.

Operating revenues (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 5% year over year to $1,344.9 million thanks to business wins reflecting new business and volume growth in Supply Chain Solutions and growth in full service lease business.

Segment Results

Fleet Management Solutions: Total revenue increased 2% year over year to $1,138.2 million in the third quarter buoyed by 12% growth in contract-related maintenance revenues. Operating revenues moved up 3% year over year to $872.2 million.

Supply Chain Solutions: Total revenue was $610.8 million, up 8% from the year-ago period. Operating revenues (excluding subcontracted transportation) grew 9% year over year to $528.3 million.

Liquidity and Capital Expenditure

Ryder System ended the reported quarter with cash and cash equivalents of $74.9 million compared with $66.4 million at year-end 2012. The company had long-term debt of $3,686 million, representing debt-to-equity ratio of 244%. Cash from operations was $890 million, while net capital expenditure amounted to $1,160.9 million.

Guidance

For 2013, Ryder narrowed its earnings estimate range to $4.78–$4.83 per share from previously estimated $4.75–$4.85. For the fourth quarter, the company estimates earnings at $1.25 to $1.30 per share.

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 more 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 environment 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.

Ryder System operates with the likes of American Railcar Industries Inc. (ARII - Snapshot Report), Aircastle Ltd (AYR - Snapshot Report) and The Greenbrier Companies Inc. (GBX - Snapshot Report). The stock presently carries a Zacks Rank #3 (Hold).

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