Ryder's New Anti-Dilutive Program

One of the leading integrated logistics and transport solution providers, Ryder System (R - Analyst Report) has announced a repurchase program involving 2 million shares. The company plans to undertake a new buyback program in order to counter the dilutive impact of shares issued under the employee stock option and employee stock purchase plans in the course of December 1, 2011 to December 13, 2013.

This is the second buyback plan after 2009, when the company bought 2 million shares to mitigate the dilutive impact of employee stock option and stock purchase plans from December 1, 2009 through December 15, 2011.

Besides such anti-dilutive programs, the company continues to focus on share repurchase so as generate increased returns for its investors. Exiting the third quarter of 2011, Ryder purchased 1,022,971 shares worth $51.4 million.

The company has also maintained a strong dividend profile for more than 35 years. In July, Ryder increased its quarterly dividend per share from 27 cents to 29 cents, representing the company’s 140th successive quarterly cash dividend.

All these initiatives toward appreciation of stock value stem from the company’s endeavor to strengthen its market position that allows profitably going forward.  In order to gain market traction, Ryder continues to invest strategically in building its assets and network infrastructure. The company invested more than $1 billion last year and approximately $700 million in the first half of 2011 toward the expansion and renewal of its commercial rental fleet.

For 2011, Ryder maintained its investment plan of $1.75 billion in both lease and rental fleets. These investments are expected to propel revenue and earnings growth going forward.

However, the company’s shrinking free cash flow position, competition from peers like Con-Way Inc. (CNW - Snapshot Report), increased debt burden, various acquisition plans that require heavy capital investment, and a stressed balance sheet call for a cautious stance on the company.

We are currently maintaining our long-term Neutral recommendation supported by a Zacks #3 Rank (Hold).

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