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Ryder (R) Up 10.6% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4-min read

A month has gone by since the last earnings report for Ryder (R). Shares have added about 10.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ryder due for a pullback? 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 drivers.

Ryder Beats Q1 Earnings Estimates

Ryder System’s (R) first-quarter 2022 earnings (excluding 24 cents from non-recurring items) of $3.59 per share surpassed the Zacks Consensus Estimate of $2.38. The bottom line increased more than 100% year over year on the back of higher revenues.

Total revenues of $2,853.9 million also outperformed the Zacks Consensus Estimate of $2,578.7 million. The top line increased 28.5% year over year on strong segmental performances.

Segmental Results

Fleet Management Solutions: Total revenues of $1,529 million were up 15% year over year. Operating revenues (excluding fuel and lease liability insurance revenues) summed $1,282 million, up 10% year over year. Segmental revenues benefited from higher rental revenues on the back of strong demand and favorable pricing. Revenues increased on higher fuel pricing as well. Within the segment, commercial rental revenues increased 40% year over year while fuel services and ChoiceLease liability insurance revenues jumped 48%. ChoiceLease revenues inched up 1% while SelectCare and other revenues climbed 13%.

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Dedicated Transportation Solutions: Total revenues amounted to $425 million, up 33% from the year-ago quarter’s figure. Operating revenues (excluding fuel and subcontracted transportation) climbed 25% to $296 million. The revenue uptick was driven by new business and favorable pricing.

Supply-Chain Solutions: Total revenues in the segment were $1,089 million, up 54% year over year. Operating revenues (excluding fuel and subcontracted transportation) rose 47% year over year to $738 million on the back of revenue growth in all industry verticals.

Other Details

Ryder exited the first quarter with cash and cash equivalents of $221.9 million compared with $234 million at the end of 2021. R’s total debt (including the current portion) rose to $6,780.8 million at the end of the first quarter from $6,579.7 million reported at the end of 2021. 

During the March quarter, gross capital expenditures increased to $662 million, up 62.7% year over year due to higher planned investments in the lease fleet. Free cash flow in the reported quarter was $107.7 million, down 55.4% year over year.

Q2 EPS Outlook

For the second quarter of 2022, Ryder expects its adjusted earnings per share (EPS) in the range of $3.50-$3.75.

2022 Outlook

Ryder now expects total revenues and operating revenues to increase approximately 17% and 14%, respectively, in 2022 (previous view: both were expected to rise 10%).

Adjusted EPS for the full year is now estimated in the range of $13.00-$14.00 (previous outlook: $11.00-$12.00). Per Ryder’s chairman and CEO Robert Sanchez, "Looking ahead, we've increased our 2022 ROE and comparable EPS forecasts reflecting continued momentum in FMS. Our forecast continues to anticipate that the very strong used vehicle sales and rental market environment will moderate in the second half of the year, with slower freight growth partially offset by ongoing vehicle production constraints”.

R expects free cash flow in the range of $550-$650 million (previous view: $200-$300 million) in 2022.  

Adjusted ROE (return on investment) is expected to be 23-25%.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

The consensus estimate has shifted 24.26% due to these changes.

VGM Scores

At this time, Ryder has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ryder has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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Zacks Investment Research