On January 4, we upgraded our long-term recommendation on
Ryder System, Inc.
) to Outperform from Neutral based on its third quarter
performance of the company that reflects improving market demand
trends. This leading transportation and supply chain management
provider also holds a Zacks #2 Rank (Buy).
Why the Upgrade?
The company reported strong third quarter results with
earnings per share substantially surpassing the Zacks Consensus
Estimate and increasing 17% from the year-ago level. Over the
past four quarters, Ryder has delivered an average surprise of
Following the release of third quarter results, the Zacks
Consensus Estimate for fourth quarter earnings has gone up by a
penny to $1.10 per share. Though the Zacks Consensus Estimate for
2012 remains unchanged at $3.96, it has gone up by 3 cents to
$4.56 for 2013.
Market sentiment remains skewed in the positive direction as
the majority of estimates for the fourth quarter, 2012 and 2013
have moved upward, indicating a strong upside in stock price.
We believe the company's overall growth emerges from
significant organic growth across its lines of business. Strong
market demand with tighter transportation markets, in particular
for trucks, has enabled the company to realize higher pricing. In
addition, we expect used vehicle sales and full service lease to
continue improving in the near future.
We also foresee favorable growth trends across all its
segments, with Fleet Management Solutions showing more promise.
This segment will continue to benefit from the acquisition of
Hill Hire PLC and organic growth in lease fleet. The company
expects greater benefits from new full-term lease contracts
compared to extended contracts, reflecting favorable market
Other Stocks to Consider
Besides Ryder System, other stocks in the transportation and
supply chain industry worth a look include
American Railcar Industries
), which has a Zacks #2 Rank (Buy). Similar to Ryder Systems, the
company benefited mostly from higher lease revenues coupled with
strong locomotive sales.
AMER RAILCAR (ARII): Free Stock Analysis
RYDER SYS (R): Free Stock Analysis Report
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