Ryder System Inc. (R - Analyst Report) , the world's largest provider of integrated logistics and transportation solutions, reported fourth quarter 2011 adjusted earnings of 97 cents in line with the Zacks Consensus Estimate and improved 49% from 65 cents in the year-ago quarter.
The year-over-year growth reflected accelerated organic growth in commercial rental and Supply Chain Solutions alongside business acquisitions gain, improved asset utilization and higher used vehicle sales. Adjusted earnings exclude the negative impacts of 5 cents related to restructuring costs arising from the integration of acquisition.
Adjusted earnings for fiscal 2011 increased 57% year over year to $3.49 per share. Adjusted earnings for the year excluded the impacts of 18 cents per share related to special item such as acquisition related transaction cost, restructuring charges and tax benefits.
The company registered revenue of $1,541.1 million in the fourth quarter, reflecting a 17% year-over-year increase. The quarter’s revenue also outpaced the Zacks Consensus Estimate of $1,535 million. The pass-through of higher fuel costs to customers and increased commercial rental revenues led to the robust growth.
Operating revenue (total revenue less Fleet Management Solutions fuel and all subcontracted transportation) increased 16% year over year to $1.2 billion, driven by acquisitions and organic growth. Revenue for the full year grew 18% year over year to $6.1 billion, while operating revenue climbed 16% year over year to $4.8 billion.
Operating expenses for the quarter was $1.5 billion, up 16.2% year over year and for fiscal 2011, Operating expenses increased 16.6% year over year to $5.8 billion.
Fleet Management Solutions: Total revenue climbed 13% year over year to $1.1 billion on higher Commercial Rental and Fuel Services revenues that increased 38% and 18%, respectively. The growth in Commercial Rental was backed by higher global demand and pricing.
Fuels Services’ revenues increased on higher fuel prices passed through to customers. On a year-over-year basis, Contract Related Maintenance revenue grew 24%, year over year. Other revenue dropped 2% year over year while Full service lease revenue increased 5% owing to acquisitions. Contractual revenue climbed up 4%. Operating revenues for the segment (revenue excluding fuel) increased 12% year over year to $813.3 million.
Supply Chain Solutions: Total revenue climbed 26% to $408.7 million in the fourth quarter from $325.1 million in the year-ago quarter. Operating revenue (excluding subcontracted transportation) also nudged up 26% year over year to $324.7 million. The improvement was driven by higher freight volumes, new business wins and the acquisition of Total Logistic Control.
Dedicated Contract Carriage: Total revenue and operating revenue (excluding subcontracted transportation) increased 29% and 23% to $156.6 million and $147.1 million, respectively, from the year-ago quarter. Higher revenues were aided by the acquisition of Scully Companies, Inc., higher fuel recoveries and improved operating performance that largely offset higher compensation-related and legal expenses.
Liquidity and Cash Flow
Ryder System ended the year with cash and cash equivalents of $1.04 billion compared to $1.03 billion in the year-end 2010. Cash from operations was $1.4 billion against $1.3 billion in the year-ago. Given heavy investments in vehicles, free cash flow was a negative $256.8 million versus a positive $257.6 million in the year ago.
Total debt at the end of fiscal 2011 was $3,078.5 million versus $2,512.0 million at the end of fiscal 2010 due to acquisitions and investments in vehicles. Debt-to-equity ratio was 257% compared with 196% at year-end 2010.
For the first quarter of 2012, management expects earnings in the range of $0.55-$0.58 per diluted share.
Management expects fiscal 2012 earning in the range of $4.00 to $4.10 per diluted share, excluding the impacts of 2 cents per share related to estimated restructuring costs in the first quarter.
Total revenue for the full-year 2012 is estimated to grow approximately 4% year over year to $6.3 billion. Operating revenue is estimated to be approximately $5.1 billion, up 6% year over year.
Despite a modest economic outlook for 2012, Ryder expects to deliver solid revenue and earnings growth backed by strong commercial rental and used vehicle sales in a favorable lease rate environment. Further, the company remains well positioned for lease fleet expansion in 2012. These continued investments in fleets and technology will fuel earnings growth in future ahead despite high maintenance cost. Further, the company aims at expand its footprint via acquisitions that will facilitate more market share gains and edge over other competitors like Con-Way Inc. .
We are currently maintaining our long-term Outperform recommendation supported by a Zacks #2 (Buy) Rank.