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Ryder System (R) Q3 Earnings: Disappointment in Store?

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Major integrated logistics and transportation solutions provider, Ryder System Inc. (R - Free Report) is scheduled to release third-quarter 2016 results before the opening bell on Oct 25.

In the second quarter, the company reported better-than-expected earnings per share. The bottom line, however, declined significantly on a year-over-year basis. The top line improved more than 2% on a year-over-year basis despite the adverse impact of foreign currency movements.

We expect the company to underperform in the third quarter due to lackluster demand.

RYDER SYS Price and EPS Surprise

 

RYDER SYS Price and EPS Surprise | RYDER SYS Quote

Earnings Whispers

Our quantitative model does not conclusively show that Ryder System will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for Ryder System is +0.61% as the Most Accurate estimate is higher than the Zacks Consensus Estimate of $1.65 per share by a penny.

Zacks Rank: The company has a Zacks Rank# 4 (Sell). In fact, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors likely at Play

Given that the Fleet Management Solutions division accounts for the bulk of the revenues at Ryder System, the segment’s below-par performance are likely to hamper the company’s third-quarter results significantly. Moreover, results are expected to be impacted by unfavorable foreign currency movements. Based on these factors, the company now expects third-quarter adjusted earnings per share in the band of $1.65–$1.72. This is below the third-quarter 2015 figure of $1.74 per share.

Results are likely to be hurt by lower rental demand coupled with soft used vehicle volumes. Additionally, stiff competition is further hurting the company’s profitability. We are also concerned about the company’s weak balance sheet.

Nonetheless, we are impressed by the company's efforts to reward shareholders through dividend payments.

Stocks to Consider

Here are a few transportation stocks that you may want to consider, as our model shows that these have the right combination for an earnings beat this time around:

Genesee & Wyoming Inc. has an Earnings ESP of +4.26% and a Zacks Rank #2 (Buy). The company, which will release its third quarter results on Nov 1, has an impressive history with respect to earnings per share, having outshined the Zacks Consensus Estimate in each of the last four quarters by an average of 5.71%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JetBlue Airways Corporation (JBLU - Free Report) has an Earnings ESP of +1.70% and a Zacks Rank #3. The company, which will release its third quarter results on Oct 25, has an impressive history with respect to earnings per share, having outshined the Zacks Consensus Estimate in each of the last four quarters by an average of 7.76%.

YRC Worldwide Inc. has an Earnings ESP of +6.82% and a Zacks Rank #3. The company’s quarterly results are scheduled to be announced on Oct 27.


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