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Why Ryder (R) Stock is Down 12.1% Since Q3 Earnings Report

Shares of Ryder System R continued with a downward trend on the bourse over the past year, partly due to softness in used vehicle sales. In a year’s time, the stock has shed 14.3% of value versus its industry’s 9.8% growth.

Moreover, the company’s third-quarter 2019 earnings report, released on Oct 29, offered no respite to its beleaguered stock as the bottom line declined 7.3% year over year. Moreover, the company provided a disappointing outlook for the fourth quarter and the full year due to persistent softness in the used vehicle market.

In fact, shares of this Zacks Rank #4 (Sell) player have dropped 12.1% since the earnings release despite its outperformance on the bottom-line front.

Let’s unearth the reasons for the stock’s share price decline.

The company’s earnings (excluding $3.27 from non-recurring items) of $1.52 per share surpassed the Zacks Consensus Estimate by 3 cents. However, the bottom line declined year over year due to below-par used vehicle sales.

Meanwhile, total revenues of $2,223.9 million came in line with the Zacks Consensus Estimate. The top line, however, improved 3.1% year over year.

Segmental Results

Fleet Management Solutions (FMS):Total revenues of $1.39 billion rose 4% year over year. Operating revenues (excluding fuel) summed $1.2 billion, up 7% year over year. Segmental results were driven by larger average fleet size and favorable pricing of new vehicles. Notably, the lease fleet increased sequentially by 2,900 vehicles.

Dedicated Transportation Solutions (DTS): Revenues totaled $359.2 million, up 5% from the year-ago quarter. Operating revenues (excluding fuel and subcontracted transportation) rose 11% to $247.7 million, backed by the expansion of the company's customer base.

Supply Chain Solutions (SCS): Revenues of $617.6 million slid 2% year over year. Further, operating revenues (excluding fuel and subcontracted transportation) dipped 2% year over year to $453.7 million. Segmental results were hurt by loss of business.

Other Details

Ryder exited the third quarter with cash and cash equivalents of $75.9 million compared with $68.1 million at the end of 2018. The company had total debt of $7,746.6 million compared with $6,649 million at 2018 end.

As the company is investing substantially in its lease and rental fleets, capital expenditures surged 30% year over year to $2.6 billion during the first nine months of 2019. Operating cash flow totaled $1.59 billion, up 24.2% year over year.

Outlook

For fourth-quarter 2019, the company anticipates its bottom line (comparable EPS) to vary between a loss of 3 cents and earnings of 7 cents. The forecast includes an impact of 95 cents from change in residual value estimates owing to lackluster conditions prevalent in the used vehicle market.

For 2019, Ryder anticipates adjusted earnings per share between $1 and $1.10 (earlier view: $5.50-$5.80). This massive decline from the earlier projection is due to the revaluation of residual values. The new guidance includes a $3.95-impact from change in residual value estimates. Moreover, Ryder expects revenues from its Supply chain unit to decrease through the middle of 2020.

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting third-quarter earnings reports from key players like Expeditors International of Washington, Inc EXPD, Air Lease Corporation AL and Hertz Global Holdings, Inc HTZ. While Hertz will release third-quarter results on Nov 4, Expeditors and Air Lease will announce the same on Nov 5 and Nov 7, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Air Lease Corporation (AL): Free Stock Analysis Report
 
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