Ryder System ( R Quick Quote R - Free Report) have been trading strongly on the bourse despite the prevalent pandemic-led distress. The stock has rallied 19% in the past year, outperforming its industry’s 6.2% growth.
Let’s look into the factors that are working in favor of the stock.
Northbound Earnings Estimates: The Zacks Consensus Estimate for 2021 earnings has moved 44.2% north in the past 60 days. Such favorable estimate revisions reflect brokers’ confidence in the stock.
Given the wealth of information at the brokers’ disposal, it is in the best interest of investors to be guided by their expert advice and the direction of their estimate revisions. This is because the same serves as a key indicator in determining the price of a stock.
Impressive Zacks Rank & VGM Score: The stock has a Zacks Rank #2 (Buy), currently, and a VGM Score of B, which further highlight its attractiveness. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here . Solid Industry Rank: The industry to which Ryder belongs, currently has a Zacks Industry Rank of 71 (of 250 plus groups). Such a solid rank places the company in the top 28% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it hails from.
In fact, an ordinary stock within a strong group is likely to outshine a robust stock in a weak industry. Therefore, reckoning an industry’s performance is of paramount importance.
Other Tailwinds: Ryder’s measures to reward its shareholders through dividends despite the coronavirus woes are praiseworthy. With the company lowering its investments in lease and rental fleets due to reduced demand as a result of the coronavirus, capital expenditures are decreasing. This should support the bottom line in turn. During the first nine months of 2020, capital expenditures fell 74% year over year to $765 million. With this reduction in capex, free cash flow came in at $1.2 billion in the same period against a negative free cash flow of $964.5 million in the year-ago period. The company estimates full-year gross capital expenditures in the range of $1-$1.1 billion compared with the previous forecast of $1-$1.3 billion.
Ryder’s cost-cutting measures to combat the coronavirus-related adversities are laudable as well. Temporary furloughs of employees, limited discretionary spending and low medical expenses led to cost savings of $50 million in the first nine months of 2020. Additionally, the company expects annual savings of $30 million in the current year from its multi-year maintenance initiative.
Other Stocks to Consider
Investors interested in the broader Zacks
Transportation sector may also consider a few other top-ranked stocks like FedEx Corporation ( FDX Quick Quote FDX - Free Report) , Herc Holdings ( HRI Quick Quote HRI - Free Report) and ArcBest Corporation ( ARCB Quick Quote ARCB - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy).
Shares of FedEx, Herc Holdings and ArcBest have gained 79%, 34% and 59%, respectively, over the past year.
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