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Here's Why Ryder's Shares Have Gained 53.7% in 6 Months

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Ryder System’s (R - Free Report) shares have held up well in the past six months, gaining 53.7% compared with the industry’s 32.3% increase.

Reasons for the Surge

Ryder’s cost-cutting measures to combat the coronavirus-related adversities are encouraging. Temporary furloughs of employees, reduced discretionary spending and low medical expenses led to cost savings of $35 million in the second quarter. It is expected to generate savings of $12 million per quarter by trimming workforce. Additionally, the company expects annual savings of $30 million in the current year from its multi-year maintenance initiative.

With the company lowering investments in lease and rental fleets due to reduced demand as a result of coronavirus, capital expenditures are declining. This is supporting the bottom line as reflected by the narrower-than-expected loss incurred in the second quarter of 2020. The company lowered its gross capital expenditure forecast to $1-$1.3 billion for 2020 compared with $2.1 billion predicted previously.

Moreover, the reduction in capital expenses is positively impacting its free cash flow. With capital expenditures declining 72.7% year over year in the first half of 2020, free cash flow came in at $612 million in the period against a negative free cash flow of $909 million in the year-ago period.

Favorable Estimate Revisions

The Zacks Consensus Estimate for September-quarter bottom line has narrowed to a loss of 43 cents from the loss of 46 cents in the past 60 days. Similarly, the Zacks Consensus Estimate for current-year bottom line has narrowed to a loss of $2.84 per share from a loss of $2.89 per share in the same time frame.

Zacks Rank & Other Key Picks

Ryder carries a Zacks Rank #2 (Buy).

Investors interested in the broader Transportation sector can consider stocks like J.B. Hunt Transport Services, Inc. (JBHT - Free Report) , Werner Enterprises, Inc. (WERN - Free Report) and Knight-Swift Transportation Holdings Inc (KNX - Free Report) . While J.B. Hunt and Werner sport a Zacks Rank #1 (Strong Buy), Knight-Swift carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for J.B. Hunt, Werner and Knight-Swift is pegged at 15%, 8.5% and 15%, respectively.

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