Ryder System, Inc. (R) provides supply chain and fleet management solutions in the United States. The company offers fleet leasing, fleet maintenance, truck rental, dedicated transportation, transportation management, freight brokerage, supply-chain optimization, warehouse and distribution, and small-business solutions.
The firm serves the automotive, consumer packaged goods, energy, food and beverage, healthcare, industrial manufacturing, metals, retail, technology and electronics, and transportation and logistics industries.
R has benefited from pent-up demand and improved economic, and freight conditions in the U.S. Favorable trends in warehousing, distribution, e-commerce fulfillment, and last-mile delivery of big and bulky have also aided the company.
In addition, unprecedented challenges impacting labor, supply chains, and truck production are providing R with additional growth opportunities as they drive companies to make long-term outsourcing decisions. In fact, the company is seeing record new contract wins in supply chain and dedicated, which management expects to contribute to long-term profitable growth.
Sales grew in all segments over the first nine months of the year as rental revenues rose. Its Fleet Management Solutions revenue jumped 9% to $4.2 billion in the first three quarters. This was driven by higher gains on used vehicles sold and strong lease and rental performance. The segment is also benefiting from companies looking to source truck capacity in the current tight market.
Tight capacity also allowed the company to raise its prices, which further contributed to its top and bottom line. The company's efforts to lower operating and overhead costs, realign its vehicle residual values and reduce the size of its rental fleet also helped the firm recover from the pandemic.
Its Supply Chain Solutions and Dedicated Transportations segments' revenues also rose 25% and 14% due to new business, favorable pricing, and higher volumes. Plus, the company has also gained on new business and favorable pricing.
Management has also raised earnings guidance for the year driven by favorable market conditions. Earnings per share are now estimated to be in the range of $8.40 to $8.50, up from the previous estimation of $7.20 to $7.50. The company now expects earnings per share to be in the range of $2.36 to $2.46 in the fourth quarter.
R should also benefit from investing in higher return logistics businesses. One example is its planned acquisition of Midwest Warehouse & Distribution System. This adds multi-client warehousing capabilities in the supply chain and helps accelerate growth. Over the long term, management expects additional benefits as leases are renewed and repriced. Ryder Ventures, its corporate venture capital fund, is looking to invest $50 million over five years through direct investment in start-ups.
R's development of new and enhanced products, including Ryder Last Mile, e-commerce fulfillment, and freight brokerage, allows the company to leverage profitable growth areas. Plus, its innovative technology enables the firm to deliver value-added logistics solutions that are in high demand.
Their Ever better campaign and increased digital marketing presence have led to a significant increase in qualified sales leads. R is also expanding its sales force and investing in its capabilities to drive additional growth opportunities.
RyderShare, which provides users with real-time freight visibility throughout the life cycle of an order and the opportunity to share information between suppliers, carriers, and shippers on one platform, is expected to be a crucial differentiator in winning new business. Almost 70% of its transportation volume and supply chain now runs through RyderShare.
As the U.S. economy continues to recover from the pandemic, the company is anticipating strong freight market conditions into next year. The company's truck leasing, rental, and logistics businesses are well-positioned to capitalize on the demand for transportation services as consumer spending increases.
The company has an overall grade of A, translating into a Strong Buy rating in our POWR Ratings system. R has a Growth Grade of B as analysts expect earnings to soar 3,225.9% for the year. The firm also has a Value Grade of B, which makes sense with a trailing P/E of only 12.71. We also provide Momentum, Stability, Sentiment, and Quality grades for R, which you can find here.
R is ranked #3 in the B-rated Industrial – Services industry. For more top stocks in this industry, click here. However, R compares favorably to its peers. For instance, United Rentals, Inc. (URI), a well-known company in the industry, has an overall grade of C and grades of C in its Growth and Value Grades.
The company also looks strong when compared to Quanta Services, Inc. (PWR). That stock also has an overall grade of C and C grades in its Growth and Value Grades.
R is just one of the stocks in my POWR Value portfolio. That's where I combine my many years of investing experience with the Top 10 Value Stocks strategy, which has +38.63% annual returns, to bring investors the best value stocks for today's market.
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R shares were unchanged in after-hours trading Friday. Year-to-date, R has gained 45.88%, versus a 26.20% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.Have $2,000? Then Consider My Value Stock of the Week appeared first on StockNews.com