It has been about a month since the last earnings report for Ryder (R). Shares have lost about 11.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ryder due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Ryder's Q2 Revenues Miss Estimates
The company’s earnings (excluding 3 cents from non-recurring items) of $1.4 per share came in line with the Zacks Consensus Estimate. However, the bottom line declined year over year due to below-par used vehicle sales.
Total revenues amounted to $2,245 million, which lagged the Zacks Consensus Estimate of $2,255.5 million. The top line, however, increased 7.5% year over year.
Segmental Results
Fleet Management Solutions (FMS): Total revenues at this segment amounted to $1.39 billion, which rose 7% year over year. Operating revenues (excluding fuel) summed $1.18 billion, up 9% year over year. Segmental results were driven by larger average fleet size and favorable pricing of new vehicles. Notably, the lease fleet increased sequentially by 3,800 vehicles.
Dedicated Transportation Solutions (DTS): At this segment, total revenues summed $362.2 million, up 10% from the year-ago quarter. Operating revenues (excluding fuel and subcontracted transportation) rose 16% to $248.1 million backed by the expansion of the customer base among other factors.
Supply Chain Solutions (SCS): Total revenues at this segment were $649.3 million, which increased 7% year over year. Operating revenues (excluding fuel and subcontracted transportation) improved 12% year over year to $483 million. Segmental results were driven by volume growth, favorable pricing and other factors.
Outlook
For third-quarter 2019, the company anticipates adjusted earnings per share between $1.45 and $1.60 compared with $1.67 registered a year ago.
For 2019, Ryder anticipates adjusted earnings per share between $5.50 and $5.80 (earlier view: $6.05 to $6.35). The company trimmed its 2019 earnings guidance as it expects weakness pertaining to used vehicle sales to persist during the current year.
Capital expenditures are expected to remain high in 2019 (anticipated to be $3.7 billion) due to increased investments by Ryder toward expanding its fleet. As a result, free cash flow is estimated to be at negative $1.12 billion in the current year.
Other Details
Ryder exited the second quarter with cash and cash equivalents of $92.5 million compared with $68.1 million at the end of 2018. The company had total debt of $7,672.3 million compared with $6,649 million at 2018 end.
As the company is investing substantially in its lease and rental fleets, capital expenditures (net) surged 53.9% year over year to $2 billion during the first half of 2019. Operating cash flow totaled $1.05 billion, up 21.4% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -13.58% due to these changes.
VGM Scores
At this time, Ryder has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ryder has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Ryder System, Inc. (NYSE:R
Original post