Ryder to Lease Natural Gas Tractors - Analyst Blog

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Ryder System Inc. ( R ), one of the leading providers of integrated logistics and transportation solutions has entered its first-ever lease contracts for supplying natural gas leased vehicles. The company has entered a full-service lease agreement for providing 23 compressed natural gas tractors to Louisiana-based Eagle Distributing of Shreveport, Inc.

Eagle Distributing of Shreveport would replace almost the entire diesel-powered delivery fleet with Ryder's natural gas vehicles. In addition, Ryder will also offer maintenance services for all 23 tractors through its Shreveport service center, which is established in accordance with the standards set for natural gas servicing facilities.

Eagle expects the new fleet of natural gas vehicles will curb greenhouse gas emissions by approximately 24%, and bring it down from 878 tons to 670 tons.

Ryder has pioneered several such initiatives that promote the utility of alternative fuel vehicles. The SANBAG (San Bernardino Associated Governments) project is one such. Under this project, Ryder collaborated with Southern California Association of Governments Clean Cities Coalition, to provide 87 heavy-duty natural gas trucks to customers.

Under the SANBAG project, Ryder received total of 202 natural gas vehicles, worth $38.7 million and marked the largest commercial natural gas truck project in North America.

In September 2011, Ryder first launched its "Flex-to-Green" lease offering to support sustainable transportation, or eco-friendly transportation for private fleet operators. This lease offering involves incorporation of fuel-efficient vehicles into their fleets including liquid natural gas and hybrid vehicles. The deal provides the customers with an opportunity to convert their conventional vehicles to new fuel-efficient ones as per their preference.

Besides Eagle Distributing of Shreveport, Inc, large freight transportation companies like FedEx Corporation ( FDX ) has also shown strong interest in promoting fuel-efficient vehicles. Last week the company set new fuel efficiency goal by reducing aircraft carbon emissions to 30% by 2020 besides meeting at least 30% of its jet fuel requirements through alternative fuels by 2030.

We believe that the growing environmental awareness among corporate houses like Ryder stems from the stringent actions taken by the regulatory authorities to restrain environmental pollution.

The U.S. federal and state governments as well as regulatory bodies like the U.S. Department of Transportation (DOT) and National Highway Traffic Safety Administration (NHTSA), as well as the U.S. Environmental Protection Agency (EPA) have taken several measures to curb global warming.

One of these key measures remains the establishment of the National Program in 2009 - an agreement between the federal government, state regulators, and the auto industry. The national program, also a two-phased program, constituted standards to establish improved fuel efficiency across a 30 years span, involving the first-ever global warming pollution standards for light-duty vehicles.

The key highlights of the first phase (2012-2016) will set the global warming pollution standards of 250 grams per mile, on average, for year 2016 model vehicles. In addition, NHTSA requires fuel efficiency standards of an average of 34.1 miles per gallon in a new vehicle. Cumulatively, these measures are expected to translate to 23% improvement in new vehicle pollution standards. It would represent an average annual improvement of 5% by 2016.

Going forward, the phase II (2017-2025) of the National Program covers standards on light vehicles, finalized by the EPA and DOT in Aug 2012. These standards require reduction in green house gas emission by cars and light trucks to 163 grams per mile in 2025 that would lead to fuel efficiency of 54.5 miles per gallon.

Consequently, we believe that Ryder's step toward promoting environment-friendly vehicles is significant in exercising these standards. This will not only result in a cleaner environment but also lower average consumer expenses on fuel, accounting for $140 billion in 2030 as per research data.

Ryder, which operates with other similar players like Trinity Industries Inc. ( TRN ) has a Zacks Rank #2 (Buy).

Other Stocks

American Railcar Industries, Inc. ( ARII ), with a Zacks Rank #1 (Strong Buy) is another stock in this sector, which we believe in worth considering.

AMER RAILCAR (ARII): Free Stock Analysis Report

FEDEX CORP (FDX): Free Stock Analysis Report

RYDER SYS (R): Free Stock Analysis Report

TRINITY INDS IN (TRN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: ARII , DOT , FDX , R , TRN

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