Ryder (R) Q4 Earnings & Revenues Beat, 2019 EPS View Up

Ryder System (NYSE:R) delivered better-than-expected results in the fourth quarter of 2018. Moreover, both earnings and revenues improved on a year-over-year basis. This fourth-quarter outperformance coupled with the company’s bullish 2019 earnings outlook pleased investors. Evidently, shares have gained more than 6% ever since the earnings release on Feb 14.

For 2019, the company anticipates adjusted earnings per share (excluding new lease accounting standard) of $6.20-$6.50 compared with $5.79 achieved in 2018. The mid-point of the guided range — $6.35 — is also above the Zacks Consensus Estimate of $6.26. Thus, the guidance issued has been impressive.

Ryder’s fourth-quarter earnings (excluding 24 cents from non-recurring items) of $1.82 per share surpassed the Zacks Consensus Estimate by a penny. The bottom line also improved 32.8% year over year on lower tax rate (courtesy of the Tax Reform) and a better operating performance.

Total revenues came in at $2,2258.3 million, above the Zacks Consensus Estimate of $2,171.7 million. The top line also rose significantly year over year with growth across all segments. As the company is investing substantially in its lease and rental fleets, capital expenditures (net) soared 86.7% year over year to $2.8 billion during 2018. Operating cash flow totaled $1.64 billion in 2018, up 5.8%.

Ryder System, Inc. Price, Consensus and EPS Surprise

Ryder System, Inc. Price, Consensus and EPS Surprise | Ryder System, Inc. Quote

Segmental Results

Fleet Management Solutions (FMS): Total revenues amounted to $1.38 billion, up 11% year over year. Operating revenues (excluding fuel) summed $1.17 billion, up 10% year over year. Increase of 19% and 8%, each in commercial rental and ChoiceLease revenues, drove this segmental performance.

Dedicated Transportation Solutions (DTS): Total revenues summed $363.1 million, up 28% from the year-ago quarter. Operating revenues (excluding fuel and subcontracted transportation) rose 18% to $233.1 million on the back of volume growth among other factors.

Supply Chain Solutions (SCS): Total revenues were $670.4 million, up 26% year over year. Operating revenues (excluding fuel and subcontracted transportation) improved 19% year over year to $489.6 million. Segmental results were boosted by volume growth and the acquisition of MXD Group, completed last April.

Liquidity

The company exited the fourth quarter with cash and cash equivalents of $68.1 million compared with $78.3 million at the end of 2017. The company had total debt of $6,623.6 million compared with $5,409.7 million at 2017 end.

Q1 & 2019 Outlook

Ryder forecasts earnings per share (excluding new lease accounting standard) of 94 cents-$1.01 in the first quarter. Albeit the mid-point of 98 cents is below the Zacks Consensus Estimate of 99 cents, the year-ago figure stands lower at 91 cents than the guided range.

Capital expenditures are expected to remain high this year as well due to higher investments in Ryder’s lease fleet. As a result, free cash flow is estimated to be at negative $1.1 billion in the year. However, total revenues are envisioned to rise around 8% to $9 billion in the current year. Also, operating revenues are predicted to increase 9% to $7 billion in 2019. The Zacks Consensus Estimate for total revenues in the first-quarter and the full year stands at $2.06 billion and $8.84 billion, respectively.

Zacks Rank & Key Picks

Ryder carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Air Lease Corporation (NYSE:AL) , Spirit Airlines, Inc. (NYSE:SAVE) and Azul S.A. (NYSE:AZUL) . While Azul sports a Zacks Rank #1 (Strong Buy), Air Lease and Spirit hold a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Shares of Azul and Spirit have surged more than 66% and 34%, respectively, in the past six months. Meanwhile, the Air Lease stock flaunts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the trailing four reported quarters, the average being 22.8%.

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