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Ryder Stock Rallies 20% in 6 Months: What Should Investors Do Now?
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Ryder System (R - Free Report) has displayed an impressive performance, with its shares appreciating 20.3% over the past six months. This growth is impressive and has outperformed its industry. Additionally, Ryder’s price performance compares favorably with that of other companies in the Equipment and Leasing industry like Wabtec Corporation (WAB - Free Report) and Air Lease Corporation (AL - Free Report) .
Six-Month Price Performance
Given the recent rally, the question that naturally arises is whether Ryder stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.
Factors Working in Favor of Ryder Stock
Highlighting its pro-investor stance, on July 12, 2024, Ryder’s board of directors approved a dividend hike of 14.1%, thereby raising its quarterly cash dividend to 81 cents per share ($3.24 annualized) from 71 cents ($2.84 annualized). The raised dividend will be paid out on Sept. 20, 2024, to shareholders of record at the close of business on Aug. 19. This marks Ryder’s 192nd consecutive quarterly cash dividend. Notably, Ryder has been making uninterrupted dividend payments for more than 48 years. This highlights its financial bliss.
Ryder’s bottom line has been benefiting from its consistent efforts to reward its shareholders through dividends and share buybacks. In 2022, Ryder paid dividends of $123 million and repurchased shares worth $557 million. In 2023, Ryder paid dividends of $128 million and repurchased shares worth $337 million.
During the first six months of 2024, Ryder paid dividends of $66 million and repurchased shares worth $141 million. Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business.
Further, Ryder has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 12.37%. Ryder has updated its 2024 adjusted earnings per share guidance to the range of $11.90-$12.40 from the prior guided $11.75-$12.50. The Zacks Consensus Estimate of $12.19 lies within the updated guidance.
For 2024, the company has raised the lower end of its adjusted ROE (return on equity) guidance in the 16%-16.5% band (prior view: 15.5%-16.5%).
Ryder's cost-cutting initiatives in response to the weak freight market conditions are also commendable. Notably, the company has reduced its 2024 capital expenditure guidance to around $2.9 billion from the $3.2 billion expected previously.
Higher free cash flow generation expectation (this reflects lower capital spending due to softer lease sales activity) for the full year is an added positive. For 2024, Ryder now expects to generate $150-$250 million of free cash flow, which marks an improvement of almost $400 million from the prior expectation of $(175)-$(275) million.
Given the tailwinds surrounding the stock, earnings estimates have been northbound, as shown below.
Image Source: Zacks Investment Research
Impressive Valuation Picture for R Stock
From a valuation perspective, Ryder is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The company has a Value Score of A.
Image Source: Zacks Investment Research
High Debt Weigh on Ryder Stock
We are concerned about Ryder’s high debt levels. The company’s long-term debt level has increased to $6.45 billion at the end of second-quarter 2024 from $4.73 billion at third-quarter 2023.
Long-Term Debt to Capitalization
Image Source: Zacks Investment Research
To Conclude
There is no doubt that the stock is attractively valued, and consistent shareholder-friendly initiatives and strong cash flow generating ability represent major tailwinds for Ryder. However, investors should refrain from rushing to buy Ryder now due to the headwinds that it faces.
Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Ryder Stock Rallies 20% in 6 Months: What Should Investors Do Now?
Ryder System (R - Free Report) has displayed an impressive performance, with its shares appreciating 20.3% over the past six months. This growth is impressive and has outperformed its industry. Additionally, Ryder’s price performance compares favorably with that of other companies in the Equipment and Leasing industry like Wabtec Corporation (WAB - Free Report) and Air Lease Corporation (AL - Free Report) .
Six-Month Price Performance
Given the recent rally, the question that naturally arises is whether Ryder stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.
Factors Working in Favor of Ryder Stock
Highlighting its pro-investor stance, on July 12, 2024, Ryder’s board of directors approved a dividend hike of 14.1%, thereby raising its quarterly cash dividend to 81 cents per share ($3.24 annualized) from 71 cents ($2.84 annualized). The raised dividend will be paid out on Sept. 20, 2024, to shareholders of record at the close of business on Aug. 19. This marks Ryder’s 192nd consecutive quarterly cash dividend. Notably, Ryder has been making uninterrupted dividend payments for more than 48 years. This highlights its financial bliss.
Ryder’s bottom line has been benefiting from its consistent efforts to reward its shareholders through dividends and share buybacks. In 2022, Ryder paid dividends of $123 million and repurchased shares worth $557 million. In 2023, Ryder paid dividends of $128 million and repurchased shares worth $337 million.
During the first six months of 2024, Ryder paid dividends of $66 million and repurchased shares worth $141 million. Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business.
Further, Ryder has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 12.37%. Ryder has updated its 2024 adjusted earnings per share guidance to the range of $11.90-$12.40 from the prior guided $11.75-$12.50. The Zacks Consensus Estimate of $12.19 lies within the updated guidance.
For 2024, the company has raised the lower end of its adjusted ROE (return on equity) guidance in the 16%-16.5% band (prior view: 15.5%-16.5%).
Ryder's cost-cutting initiatives in response to the weak freight market conditions are also commendable. Notably, the company has reduced its 2024 capital expenditure guidance to around $2.9 billion from the $3.2 billion expected previously.
Higher free cash flow generation expectation (this reflects lower capital spending due to softer lease sales activity) for the full year is an added positive. For 2024, Ryder now expects to generate $150-$250 million of free cash flow, which marks an improvement of almost $400 million from the prior expectation of $(175)-$(275) million.
Given the tailwinds surrounding the stock, earnings estimates have been northbound, as shown below.
Impressive Valuation Picture for R Stock
From a valuation perspective, Ryder is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The company has a Value Score of A.
High Debt Weigh on Ryder Stock
We are concerned about Ryder’s high debt levels. The company’s long-term debt level has increased to $6.45 billion at the end of second-quarter 2024 from $4.73 billion at third-quarter 2023.
Long-Term Debt to Capitalization
To Conclude
There is no doubt that the stock is attractively valued, and consistent shareholder-friendly initiatives and strong cash flow generating ability represent major tailwinds for Ryder. However, investors should refrain from rushing to buy Ryder now due to the headwinds that it faces.
Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.