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Ryder System (R) Q3 Earnings: What's in Store for the Stock?

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Ryder System, Inc. (R - Free Report) , which operates one of North America’s largest truck fleets, is scheduled to report third-quarter 2017 results on Oct 24, before the market opens.

In the second quarter, the Florida-based company’s adjusted earnings of $1 per share beat the Zacks Consensus Estimate of 93 cents. Earnings, however, declined 36% on a year-over-year basis. Ryder has a mixed record with respect to earnings per share, having outshined the Zacks Consensus Estimate in two of the last four quarters.

Factors Likely at Play in Q3

Strong rental activity is likely to boost Ryder’s third-quarter results. The company's efforts to grow its lease fleet remain a positive. The continuous growth in ChoiceLease revenues is encouraging, which is driving growth at Ryder's primary division — Fleet Management Solutions.

As bulk of the company’s revenues is derived from the Fleet Management Solutions division, impressive performance at this unit will boost the top line in the third quarter. In view of the improving rental activity, Ryder expects third-quarter adjusted earnings per share between $1.25 and $1.35, much higher than the figure reported in the second quarter.

The company's strong customer base is also a positive. We believe Ryder's top line in the third quarter might benefit from a strong product portfolio.

However, weakness pertaining to automotive production volumes is expected to hurt results at its Supply Chain Solutions unit. High costs also might affect segmental results. Results at the company’s Dedicated Transportation Solutions may be hurt owing to higher insurance premiums.

What Does Our Model Say?

Our proven model does not show conclusively that Ryder will beat earnings in third-quarter 2017. This 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. However, that is not the case as highlighted below.

Zacks Rank: Ryder carries a Zacks Rank #2.

Zacks ESP: The company’s Earnings ESP of -0.19%, however, acts as a spoiler. The Zacks Consensus Estimate of $1.28 per share exceeds the Most Accurate estimate by a penny. The Zacks Rank combined with a negative Earnings ESP leaves the surprise prediction inconclusive. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Ryder System, Inc. Price and EPS Surprise

Ryder System, Inc. Price and EPS Surprise | Ryder System, Inc. Quote

Stocks to Consider

Investors interested in the broader transportation space may consider Norfolk Southern Corporation (NSC - Free Report) , SkyWest, Inc. (SKYW - Free Report) and Kansas City Southern (KSU - Free Report) as our model shows these possess the right combination of elements to post an earnings beat in the quarter.

Norfolk Southern has an Earnings ESP of +0.67% and a Zacks Rank #3. The company will report third-quarter results on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

SkyWest has an Earnings ESP of +1.03% and a Zacks Rank #3. The company will report third-quarter 2017 results on Oct 25.

Kansas City Southern has an Earnings ESP of +0.16% and a Zacks Rank #3. The company will report third-quarter 2017 results on Oct 20.

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