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Declining Rental Demand Hurts Ryder (R), Cost-Cuts Aid

We recently issued an updated report on Ryder System, Inc. R.

Like many other transportation companies, Ryder is hit by uncertainties related to the COVID-19 pandemic.

Ryder is seeing significant decline in rental demand due to reduced business activity stemming from the coronavirus pandemic. Used vehicle sales, which were already under pressure due to low pricing and increased wholesaling activity, received a further blow from the COVID-19 outbreak, with sales activity falling significantly. The company’s primary division, Fleet Management Solutions, experienced a negative impact of approximately $60 million in the first quarter of 2020 due to the coronavirus-related adversities.

Besides, the Supply Chain Solutions unit is significantly hurt by the coronavirus outbreak. Coronavirus-led production shutdowns at the automotive industry are putting pressure on volumes. Ryder anticipates earnings from the unit to be fall $15-$20 million per month in case of prolonged production shutdowns in North America.

However, since the company is cancelling and deferring lease as well as rental fleets due to the COVID-19 pandemic, capital expenditures are falling. This is aiding the bottom line. Notably, net capital expenditures fell 71% year over year to $289 million in the March end quarter.

Ryder’s cost-cutting measures are impressive. Reduction in discretionary spending and overhead costs as well as employee furloughs are expected to lower total expenses by $20 million in the second quarter. Additionally, the company expects annual savings of $30 million in the current year from its multi-year maintenance initiative.

Zacks Rank & Key Picks

Ryder carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Transportation sector are Scorpio Tankers Inc. STNG, Teekay Tankers Ltd. TNK and Nordic American Tankers Limited NAT. All carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

The Zacks Consensus Estimate for Scorpio Tankers’ current-year earnings has been revised upward in excess of 100% in the past 60 days.

The Zacks Consensus Estimate for Teekay Tanker’s current-year earnings has been revised upward by 35.6% in the past 60 days.

The Zacks Consensus Estimate for Nordic American Tankers’ current-year earnings has been revised upward by 14.1% in the past 60 days.

5 Stocks to Soar Past the Pandemic

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See the 5 high-tech stocks now>>

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Ryder System, Inc. (R): Free Stock Analysis Report
Nordic American Tankers Limited (NAT): Free Stock Analysis Report
Teekay Tankers Ltd. (TNK): Free Stock Analysis Report
Scorpio Tankers Inc. (STNG): Free Stock Analysis Report
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