On Jun 14, we maintained our Neutral recommendation on
Ryder System Inc.
), owing to favorable industry fundamentals along with improved
average fleet age, prospects in rental business and better
financials. However, the company faces certain headwinds that
will likely slow down its growth momentum. The company, which
operates with the likes of
), holds a Zacks Rank #2 (Buy).
We believe that Ryder System will continue to benefit from
organic growth across its business line. The company expects
improved offerings in contractual product lines in the Fleet
Management Solutions segment with a newer lease fleet and various
maintenance initiatives to increase 2013 earnings. Additionally,
organic growth in Full Service Lease along with improved volumes
in new business and supply chain are expected to aid the company
in generating high revenues in the coming months.
We also appreciate the company's consistent strategic investment
in commercial rental and leased vehicles, maintenance technology,
sales and information technology initiatives. Ryder sees immense
prospects in rental demand that will likely lead to increased
fleet utilization and price.
Hence, the company continues to focus on streamlining its
fleet size, with plans to dispose additional used vehicles to
meet demand and supply requirements. Ryder's cost restructuring
moves along with its commitment to improve the financial position
will enable it to achieve its set objectives.
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However, despite these positive aspects, we prefer to stay on the
sidelines considering the difficult operating environment with
high market competitiveness. Competitors may have greater capital
resources or lower capital costs, which will likely remain
detrimental to Ryder's growth. Further, federal regulations,
international business risks and the constant need for technical
upgrades will likely weigh on the stock.
The second and third quarters of 2013 have the Zacks Consensus
Estimate for earnings pegged at $1.22 and $1.46 per share,
respectively. This reflects a year-over-year growth of 22.2% in
the next quarter and 13.8% in the third.
Companies operating within the transportation sector that are
worth taking notice of are
Trinity Industries Inc.
). Both the stocks carry Zacks Rank #2 (Buy).