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Ryder (R) Up 10.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Ryder (R - Free Report) . Shares have added about 10.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ryder due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Ryder's Q3 Earnings Beat Estimates

Ryder's earnings (excluding $3.27 from non-recurring items) of $1.52 per share surpassed the Zacks Consensus Estimate by 3 cents. However, the bottom line declined year over year due to below-par used vehicle sales.

Meanwhile, total revenues of $2,223.9 million were roughly in line with the Zacks Consensus Estimate. The top line, however, improved 3.1% year over year.

Segmental Results

Fleet Management Solutions (FMS):Total revenues of $1.39 billion rose 4% year over year. Operating revenues (excluding fuel) summed $1.2 billion, up 7% year over year. Segmental results were driven by larger average fleet size and favorable pricing of new vehicles. Notably, the lease fleet increased sequentially by 2,900 vehicles.

Dedicated Transportation Solutions (DTS): Revenues totaled $359.2 million, up 5% from the year-ago quarter. Operating revenues (excluding fuel and subcontracted transportation) rose 11% to $247.7 million, backed by the expansion of the company's customer base.

Supply Chain Solutions (SCS): Revenues of $617.6 million slid 2% year over year. Further, operating revenues (excluding fuel and subcontracted transportation) dipped 2% year over year to $453.7 million. Segmental results were hurt by loss of business.

Other Details

Ryder exited the third quarter with cash and cash equivalents of $75.9 million compared with $68.1 million at the end of 2018. The company had total debt of $7,746.6 million compared with $6,649 million at 2018 end.

As the company is investing substantially in its lease and rental fleets, capital expenditures surged 30% year over year to $2.6 billion during the first nine months of 2019. Operating cash flow totaled $1.59 billion, up 24.2% year over year.

Outlook

For fourth-quarter 2019, the company anticipates its bottom line (comparable EPS) to vary between a loss of 3 cents and earnings of 7 cents. The forecast includes an impact of 95 cents from change in residual value estimates owing to lackluster conditions prevalent in the used vehicle market.

For 2019, Ryder anticipates adjusted earnings per share between $1 and $1.10 (earlier view: $5.50-$5.80). This massive decline from the earlier projection is due to the revaluation of residual values. The new guidance includes a $3.95-impact from change in residual value estimates. Moreover, Ryder expects revenues from its Supply chain unit to decrease through the middle of 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -39% due to these changes.

VGM Scores

Currently, Ryder has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ryder has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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