Shares of Ryder System (R - Free Report) tumbled to a 52-week low of $51.26 on Nov 20. However, shares recovered to some extent to close the trading session at $51.80, down 3.4% from the closing price of Nov 19.
In fact, a glimpse of the company’s share price movement shows that this transportation company have underperformed the Zacks Equipment & Leasing industry on a year-to-date basis. The stock has shed 38.4% of its value compared with the industry’s 13.5% decline.
Year-to-date Price Performance
What's Pulling the Stock Down?
Ryder’s bottom-line growth is being hurt by high operating expenses. The company expects its gross capital expenditures to be $3.1 billion in 2018 (gross capital expenditures totaled $1.94 billion in 2017). The increase is attributable to the higher lease fleet growth.
Going forward, this increased capital spending might negatively impact the company’s bottom-line performance. In fact, Ryder’s net capital expenditures rose more than 60% to $2.3 billion in the first nine months of 2018 on account of significant investments on its lease and rental fleets. Moreover, rising fuel costs do not bode well for any transportation company and Ryder is no exception.
Also, Ryder is a highly leveraged company. Its debt to equity ratio (expressed as percentage) is well above its industry and the S&P 500 Index. At the end of the third quarter of 2018, it had total debt of $6,283.1 million compared with $5,409.7 million at 2017 end.
The scenario pertaining to used vehicle sales is expected to remain challenging in the remainder of 2018 owing to weak market conditions. This too does not bode well for the company.
Zacks Rank & Key Picks
Ryder carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Transportation sector are Matson, Inc. (MATX - Free Report) , CSX Corporation (CSX - Free Report) and Canadian Pacific Railway Limited (CP - Free Report) . While Matson has a Zacks Rank #2 (Buy), CSX Corporation and Canadian Pacificsport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Matson, CSX Corporation and Canadian Pacific have gained 8.7%, 9.1% and 8.4%, respectively, in the past six months.
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