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Ryder Wins Maintenance Contract

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One of the world’s largest providers of integrated logistics and transportation solutions, Ryder System Inc. (R - Free Report) will be providing onsite maintenance for a fleet of 500 trucks and 675 trailers and a full service lease for 205 tractors to Multi Group Logistics, Inc, an Illinois based truckload service provider. Financial terms of the deal remained undisclosed.

Ryder will provide its advanced technology for fleet maintenance at Multi Group Logistics. The company’s Full Service Lease contract involves the turnkey lease project, comprising vehicle configuration, financing, acquisition, maintenance and disposal.

Currently, Ryder operates more than 225 On-Site Fleet Maintenance facilities in the U.S., Puerto Rico and Canada, out of the total service network of 800 facilities. Unlike extended contracts, the company expects the new full-term lease contracts to help it gain market share.

We believe Ryder continues to benefit from strong commercial rental and used vehicle sales backed by a favorable lease rate environment. In addition, strategic acquisitions and increased investments in vehicles provide long-term growth potential for the company.

However, we remain concerned about the challenging economic environment surrounding the company’s operations despite its strong performance. Further, heavy capital expenditures, a distressed cash position, lower demand on tighter truckload market and competition from the likes of AmeraMex International, Inc. are also expected to create significant headwinds for the company.

We, currently, have a long-term Neutral rating on Ryder System. For the short term (1–3 months), the stock retains a Zacks #3 Rank (Hold).

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