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Ryder (R) Up 10.7% 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 10.7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Ryder Incurs Loss in Q2
Ryder incurred a loss (excluding 47 cents from non-recurring items) of 95 cents per share in second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $1.44. In the year-ago period, the company reported earnings of $1.4 per share. Coronavirus-related woes hurt pre-tax earnings to the tune of $45 million in the second quarter.
Total revenues of $1,895.3 million missed the Zacks Consensus Estimate of $1,998.8 million. Moreover, the top line declined 15.6% year over year due to lower commercial rental demand and reduced automotive activity in Supply Chain Solutions unit, thanks to coronavirus.
Segmental Results
Fleet Management Solutions (FMS): Total revenues in the segment amounted to $1.2 billion, which dropped 14% year over year. Operating revenues (excluding fuel) summed $1.1 billion, down 8% year over year. Segmental results were affected by decrease in commercial rental revenues due to low demand. Commercial rental revenues fell 33% from the year-earlier quarter’s figure. ChoiceLease revenues inched up 1% year over year owing to increase in fleet size and higher prices on new vehicles.
Dedicated Transportation Solutions (DTS): Total revenues amounted to $294 million, down 19% from the year-ago quarter’s figure. The decline in DTS’ total revenues was primarily due to lower subcontracted transportation revenues and lower fuel costs passed to customers. Operating revenues (excluding fuel and subcontracted transportation) decreased 8% to $228 million.
Supply Chain Solutions (SCS): Total revenues in the segment were $519 million, down 20% year over year. Operating revenues (excluding fuel and subcontracted transportation) declined 16% year over year to $405 million. Segmental results were hurt by coronavirus-related volume reductions in the automotive sector.
Liquidity
Ryder exited the year with cash and cash equivalents of $831.5 million compared with $73.6 million at the end of 2019. The company’s total debt rose to $8,147.7 million at the end of the second quarter from $7,924.8 million at the end of 2019.
Year-to-date capital expenditures declined 72.7% year over year to $0.6 billion. This decline in capital expenditures was due to lower investments in the lease and rental fleets as a result of reduced demand thanks to coronavirus. With reduced capital expenditures, free cash flow was $612 million in the year-to-date period against negative free cash flow of $909 million in the year-ago period.
Anticipating low lease sales in 2020, the company estimates full-year gross capital expenditures in the range of $1-$1.3 billion, less than the previous (prior to coronavirus outbreak) forecast of $2.1 billion. This reduction in capital expenses is estimated to generate free cash flow of $1-$1.2 billion in 2020, against negative free cash flow of $1.1 billion in 2019. Operating cash flow is estimated between $1.8 billion and $2 billion in the current year. The company is on track to realize annual savings of $30 million in 2020 from its maintenance cost initiative.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -293.1% due to these changes.
VGM Scores
At this time, Ryder has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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. Notably, Ryder has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Ryder (R) Up 10.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Ryder (R - Free Report) . Shares have added about 10.7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Ryder Incurs Loss in Q2
Ryder incurred a loss (excluding 47 cents from non-recurring items) of 95 cents per share in second-quarter 2020, narrower than the Zacks Consensus Estimate of a loss of $1.44. In the year-ago period, the company reported earnings of $1.4 per share. Coronavirus-related woes hurt pre-tax earnings to the tune of $45 million in the second quarter.
Total revenues of $1,895.3 million missed the Zacks Consensus Estimate of $1,998.8 million. Moreover, the top line declined 15.6% year over year due to lower commercial rental demand and reduced automotive activity in Supply Chain Solutions unit, thanks to coronavirus.
Segmental Results
Fleet Management Solutions (FMS): Total revenues in the segment amounted to $1.2 billion, which dropped 14% year over year. Operating revenues (excluding fuel) summed $1.1 billion, down 8% year over year. Segmental results were affected by decrease in commercial rental revenues due to low demand. Commercial rental revenues fell 33% from the year-earlier quarter’s figure. ChoiceLease revenues inched up 1% year over year owing to increase in fleet size and higher prices on new vehicles.
Dedicated Transportation Solutions (DTS): Total revenues amounted to $294 million, down 19% from the year-ago quarter’s figure. The decline in DTS’ total revenues was primarily due to lower subcontracted transportation revenues and lower fuel costs passed to customers. Operating revenues (excluding fuel and subcontracted transportation) decreased 8% to $228 million.
Supply Chain Solutions (SCS): Total revenues in the segment were $519 million, down 20% year over year. Operating revenues (excluding fuel and subcontracted transportation) declined 16% year over year to $405 million. Segmental results were hurt by coronavirus-related volume reductions in the automotive sector.
Liquidity
Ryder exited the year with cash and cash equivalents of $831.5 million compared with $73.6 million at the end of 2019. The company’s total debt rose to $8,147.7 million at the end of the second quarter from $7,924.8 million at the end of 2019.
Year-to-date capital expenditures declined 72.7% year over year to $0.6 billion. This decline in capital expenditures was due to lower investments in the lease and rental fleets as a result of reduced demand thanks to coronavirus. With reduced capital expenditures, free cash flow was $612 million in the year-to-date period against negative free cash flow of $909 million in the year-ago period.
Anticipating low lease sales in 2020, the company estimates full-year gross capital expenditures in the range of $1-$1.3 billion, less than the previous (prior to coronavirus outbreak) forecast of $2.1 billion. This reduction in capital expenses is estimated to generate free cash flow of $1-$1.2 billion in 2020, against negative free cash flow of $1.1 billion in 2019. Operating cash flow is estimated between $1.8 billion and $2 billion in the current year. The company is on track to realize annual savings of $30 million in 2020 from its maintenance cost initiative.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -293.1% due to these changes.
VGM Scores
At this time, Ryder has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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. Notably, Ryder has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.