do you get when you cross the need for efficient, affordable global
with an economy that’s sputtering along and corporations trying to cut
but maintain customer satisfaction?
outsourcing! (Well that’s one
solution at least)
In a nutshell,
Ryder’s services can be utilized
to save companies money, keep their margins wide, surprise costs
their logistic issues under control. If
sales growth is nominal and margins are cherished like a newborn baby,
outsourcing is a viable and sometimes necessary option.
you’re not familiar, Ryder
(R - Free Report)
system is more
than just a truck rental company. They
are a provider of innovative outsourced transportation, logistics and
chain solutions globally.
Management Solutions division (FMS)
provides leasing, rental and preventive maintenance of trucks, tractors
trailers to commercial customers. Supply Chain Solutions (SCS) manages
movement of freight and related information from the acquisition of raw
materials to the delivery of finished products to end-users. SCS also
dedicated transportation solutions, known as Ryder Dedicated, a
transportation service that combines vehicles, maintenance, drivers,
and other value-added services.
Ryder recently reported (April 23rd)
a 37% year over year jump in earnings per share to 81 cents, trumping
Consensus estimate by 2 cents. This
latest report marks the 4th earnings beat in a row for the company
at an average of almost 6%.
Even though shares
initially moved lower, the
stock has been charging higher since for good reason as investors find
the logistics company; the 2.10% dividend yield doesn’t hurt either.
CEO Robert Sanchez
noted that the company “experienced
better-than-expected demand for commercial rental in North America with
utilization on a smaller fleet.” Weak
demand in the UK stole a little bit of the jam from their donut, but
still reaffirmed its full-year 2013 earnings forecast of $4.70 to $4.85
share and sees Q2 EPS of $1.20 to $1.24 per share. The Zacks Consensus
Q2 EPS of $1.22 and $4.84 in FY2013.
The company also sees
increasing strength in their commercial rental divisions as well as
used vehicle sales.
After the report we
saw several analysts move
their estimates and ratings up on the stock, for the current quarter as
FY2013 and FY2014. Shares are still
fairly cheap at just 12 times forward earnings, even though we have
at much lower multiples over the past couple years.
There could still be
decent upside here if
the American economy does indeed continue to improve as FY2014
still relatively conservative. Of course
a boom would be great for the stock, but slow growth also provides
goods to be moved and for companies to keep logistics outsourced; to
leaves upside for the shares.
and Natural Gas
Just a week ago, AT&T
(T - Free Report)
announced a plan to spend $350 million to replace
about 8,000 gasoline-powered service vehicles over five
years. AT&T currently has 5,200 natural gas vans
on the road, or about 7 percent of its fleet.
These same steps are
being taken by several
large companies including UPS
(UPS - Free Report) ,
FedEx (FDX - Free Report) and
others including Ryder.
consumption in the
transportation industry was roughly 400 million gallons of gasoline
last year, double the 200 million in 2005 according to NGVAmerica data.
Gasoline demand was 134 billion gallons, according to the EIA.
According to several
sources, a fleet owner
paying $65,000 more for a long-haul truck engine fueled by liquefied
gas could see a 20-25% percent rate of return over the life of the
compared to a traditional gas engine.
Ryder has already
begun to implement natural
gas powered vehicles into its fleet; so if you are a longer term player
in the stock,
that cost savings should begin to mount up in the coming years.
Natural gas is a
“ready-now” viable alternative
to traditional petrol and it’s cheaper, (saving truckers as much as
gallon), burns cleaner and makes it easier to for manufacturers and
to meet emissions standards.
Infrastructure for nat gas is already on the rise in a big way.
Since the earnings report on
Ryder shares have been forming an ascending bullish triangle up against
and 20 day moving averages ($58.28 & $57.87 respectively)
out three days ago.
This breakout kept
the short term bullish
trend alive and shares are now approaching their next resistance level
$61.70, which has been a hard ceiling for the shares over the past
month or so.
While shares are
slightly overbought here,
there is a possibility of a quick breakout above that resistance level
and then a 2-4% rally from there being that the Average True Range
roughly 3.3% of the stock price and a surge above a major resistance
usually prompts a rally of that magnitude.
Shares also remain in
a strong overall
bullish trend perched high above their 200 day moving average of
While it’s good to have the 20 and 50 day averages
close below for support, keep in mind that Ryder’s Beta of 1.7 makes it
correlated to market movement with a slight amplification of that
Look for strong
support around the $57.70 level,
which is right below the 50 day moving average.
If you are a market
timer, look for a down
day in the market to try and get a slightly better price. For those of
are investors, take a peek at their business; Ryder shares might be
look and at least part of your allocation if it meets your risk
A Levy is one of the most highly sought after traders in the world and
member of three major stock exchanges. That is why you will frequently
appear on Fox Business, CNBC and Bloomberg providing his timely
other investors. He has written and published two tomes, “Your
Options Handbook” and “The
Bloomberg Visual Guide
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