Ryder System Inc.
), the world's largest provider of integrated logistics and
transportation solutions, has expanded its fleet services to
Hollywood by deploying new fleet of rental studio trucks in Los
Angeles. The trucks would be available in two categories: the
16-foot Super Cube trucks and the 26-foot Five Ton trucks.
The trucks are designed with the sole purpose of fulfilling the
need of the entertainment industry.
Ryder currently operates 34 studio trucks, of which 10 trucks
are 16 feet long and 24 are 26 footers. The company operates in 500
locations across the U.S. and Canada and has a total fleet of
approximately 30,000 vehicles.
Strong demand with tighter transportation markets, particularly
for trucks, has enabled the company to realize higher pricing in
the truck fleet category. We expect the company's strong organic
growth to continue on the back of increased demand for commercial
rental vehicles alongside higher used vehicle sales.
In addition to introducing customized vehicles for industry
specific requirements, Ryder is also targeting emerging markets for
fuel efficient vehicles under projects like SANBAG (San Bernardino
Associated Governments). The company also has alliance with U.S.
based publishing and logistics company Source Interlink to provide
natural gas vehicles.
Moreover, the company is looking forward to cost restructuring
with optimum fleet management. Ryder has already adjusted its
rental fleet size to the current demand levels and plans to dispose
of additional used vehicles to optimize the demand and supply
To support these strategic developments, Ryder continues to
invest in commercial rental and leased vehicles. In addition, the
company also invests in maintenance technology as well as sales and
information technology. For 2012, Ryder expects total capital
expenditure to be between $2.1 billion and $2.2 billion. We believe
these investments would propel revenue and earnings growth going
However, we remain concerned about the challenging economic
environment surrounding its operations. Further, heavy capital
expenditures, a distressed cash position, lower demand on tighter
truckload market and competition from the likes of
Trinity Industries Inc.
) are expected to create significant headwinds for the company.
We, currently, have a long-term Neutral recommendation on Ryder
System. For the short term (1-3 months), the stock retains a Zacks
#4 Rank (Sell).
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