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Ryder Looks Promising despite Revenue Weakness: Hold On

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On Sep 30, 2015, we issued an updated research report on Ryder System, Inc.R , a major provider of integrated logistics and transportation solutions.

The company reported mixed financial results for the second quarter of 2015 with its bottom line outpacing the Zacks Consensus Estimate while the top line missed the same. The top line was hurt by a 3% decline in total revenue at the Fleet Management Solutions unit.

Even though the company's top line miss in the second quarter was disappointing, we are not too perturbed by it as revenue weakness, courtesy a strong dollar, was witnessed across the board in the second quarter. Revenue weakness is expected to persist in the third quarter as well (results for which will be announced on Oct 22); however the company's strong fundamentals should enable it counter the headwinds effectively.

Ryder expects earnings per share in the third quarter in the band of $1.82 to $1.87. We expect the company to achieve the guidance provided. Consequently, the Zacks Consensus Estimate of $1.85 per share for the third quarter is well within the guidance range.

Moreover, in Jul 2015, Ryder hiked its quarterly cash dividend by 10.8% to 41 cents per share. This marked the eleventh dividend hike by the company since 2005. The company has been boosting shareholders' wealth by paying uninterrupted dividend for the last 39 years. We are impressed by the company's efforts to reward its shareholders in this consistent manner.

Furthermore, the company's efforts toward deploying a fuel-efficient fleet will help strengthen its foothold in the rapidly growing market of environmentally friendly vehicles.

Don't Dump Ryder Now

We believe dumping the stock now will be sheer foolhardiness given its strong fundamentals. The Zacks Rank #3 (Hold) carried by the stock is further confirmation that investors should hold on to the stock currently as it is expected to perform in line with the broader market over the next 1-3 months.

Other Picks

While we advise investors to hold on to Ryder's stock at the moment, investors interested in the transportation sector may consider adding Atlas Air Worldwide Holdings AAWW , Aircastle Ltd AYR and Avolon Holdings Limited AVOL to their portfolio. The bullish Zacks Rank #2 (Buy) carried by each of the three stocks further supports our view.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

RYDER SYS (R): Free Stock Analysis Report

AIRCASTLE LTD (AYR): Free Stock Analysis Report

ATLAS AIR WORLD (AAWW): Free Stock Analysis Report

AVOLON HOLDINGS (AVOL): 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.


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

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