Ryder System Inc.
), the world's largest provider of integrated logistics and
transportation solutions, has reported adjusted earnings of 59
cents that surpassed the Zacks Consensus Estimate by a penny and
increased 16% from 51 cents in the year-ago quarter. Adjusted
quarterly net income also increased 16% year over year to $30.6
million from $26.3 million in the year-ago period.
The company achieved double-digit growth backed by the
acquisition gains in Fleet Management Solutions, higher vehicle
sales as well as strong organic growth in commercial rental and
Supply Chain Solutions.
The company registered revenue of $1,536.3 million in the first
quarter, reflecting an 8% year-over-year increase. The quarter's
revenue also outpaced the Zacks Consensus Estimate of $1,516
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 9% year over
year to $1,228.9 million, driven by acquisitions and organic
Fleet Management Solutions
Total revenue climbed 9% year over year to $1,071.4 million on
higher Commercial Rental and Fuel Services revenues that increased
26% and 6%, 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 20% and operating revenue (revenue excluding fuel)
increased 10%. Other revenue registered a modest growth of 1% and
Full Service Lease revenue increased 5%. Contractual revenue
Supply Chain Solutions
Total revenue (including dedicated contract carriage service
revenues) leaped 7% to $571.9 million in the first quarter from
$535.8 million in the year-ago quarter. Operating revenue
(excluding subcontracted transportation) also grew 7% year over
year to $ 484.6 million. The year-over-year growth was primarily
based on higher volumes in automotive, retail and consumer packaged
goods and dedicated contract carriage. Further, revenues were also
aided by the acquisition of Scully Companies, Inc. during last year
Liquidity and Cash Flow
Ryder System ended the quarter with cash and cash equivalents of
$113.6 million compared with $104.6 million at year-end 2011. Cash
from operations was $186 million compared with $218 million in the
year-ago quarter. Given heavy investments in vehicles, free cash
flow was a negative $175 million versus a negative $9.6 million at
Long-term debt at the end of the first quarter was $3,006.3
million compared with $3,107.8 million at the end of fiscal 2011
due to acquisitions and investments in vehicles. Debt-to-equity
ratio was 262% compared with 257% at year-end 2011.
Management expects second quarter 2012 earnings in the range of
$1.07 to $1.12 per share. For FY12, management expects earnings in
the range of $4.02 to $4.12 per share.
We believe that Ryder System remains well positioned to benefit
from organic growth and acquisitions, as well as a favorable lease
rate environment. Increased commercial rental and used vehicle
sales will remain the key areas of volume expansion. Higher fuel
surcharges, given surging fuel prices will also aid revenue growth
in the near term. However, heavy capital expenditures, a distressed
cash position , currency headwinds and competition from peers like
), could limit the near-term growth for the company. Hence, we have
a Neutral recommendation on the stock with a target price of $54,
based on 13.4x our earnings estimate for 2012.
We are currently maintaining our long-term Neutral
recommendation supported by a Zacks #3 Rank (Hold).
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