Marcus Lindström
Dear readers/subscribers,
In this article, we’re going to take a look at Ryder System (NYSE:R). Ryder is a game about trucks and logistics, and in this game we are going to deconstruct the company to see what merit it has as a conservative investment. There’s a lot to be said for logistics corporations these days, as they’re perhaps more necessary than ever.
Let’s see what this company can offer us.
Ryder is one of North America’s leading transportation and logistics companies. The company focuses on providing SCM, transportation and fleet control responses to its customers.
Its segments can be understood on the following basis/report:
The company’s vision is state-of-the-art fleet control and SCM responds in terms of reliability, power and safety. Ryder’s current strategy is expansion into extensive low-capital business lines and progression of the company’s fleet control through targeted corporations that manage SCM in-house or outsource logistics desires to third parties.
Outsourcing transport and fleet control to Ryder means consumers can focus on their core business. Fleet control offerings come with full-service leasing features as well as short-term features. The company also provides the opportunity to purchase (used) Ryder trucks as well as tractors and trailers through its sales services or virtual channels. FMS also provides maintenance and fuel for the other two segments.
IR Ryder (IR Ryder)
FMS is by far the largest service introduced through Ryder: 52% of profits were made from this segment in 2021. Customer sizes range from small to domestic businesses, with the main visitor segments being food, beverage, housing, private and industrial.
The company has more than 520 operating sites, which also have garage sites, in 50 states and Puerto Rico. Ryder also operates on the site with consumers in 155 cases, primarily to service the vehicles. In addition to its U. S. locations, Ryder also has 28 sites in Canada and 341 third-party maintenance facilities, and 42 operational sites in Europe, primarily in the U. K. and Germany.
IR Ryder (IR Ryder)
However, to be clear, Ryder is leaving the UK due to margin strain and the company finding the market unattractive. This should not be taken as a sign that the company’s market is not attractive, as this is not the case. Every segment the company is in has significant expansion potential, and while Ryder isn’t the strongest company in terms of trends and long-term EPS expansion, there’s still significant security here.
The correlation of the corporate with the macro is strong. During the currency crisis, UPAs fell more than 60% to rebound strongly, and the same happened with COVID-19, but more extremely. However, the same rally in 2021 came with a vengeance, with adjusted EPS up to 3,600%.
The company’s long-term trend is relatively positive, and the company did not cut its dividend in 2019, nor did it in 2020, when the company’s adjusted EPS did not actually cover the dividend. In fact, Ryder increased it.
As such, this venture is cyclical and for shareholders as it envisions its business in the much longer term.
IR Ryder (IR Ryder)
The company’s plans for its returns and FCF are presented here: increase rental costs and margins and the overall mix, among others.
The fact that since the results of FY21, the Company has effectively evolved its combination to an SCS/SDR combination of more than 50%, deserves to mean that the Company is poised to deliver its overall returns and grow its core EPS from a basic perspective, compared to how things have been historically.
The company aims to improve the mix by focusing on its e-commerce platform, last-mile services, freight brokerage, more technology/IT, marketing spend with sales force expansion, and more mergers and acquisitions. The most recent mergers and acquisitions here are Whiplash and Midwest Acquisitions.
Results on a quarterly and annual basis are very encouraging, with double-digit earnings expansion with the doubling of ROE, solid or near-stable FCF and significant UPA expansion due to impressive increases in sales and used rentals. The company is well placed in the current cycle, as existing trends continue to favour outsourcing rather than internal transport/logistics management. 85% of the company’s operating profit is based on contractual profits, such as lease/SCS/SDR.
Ryder has a credit rating of BBB and its current market capitalization of less than $4 billion means it has sufficient prospect of expansion in the future. Its functionality is fantastic, but it’s incredibly well covered and shows up over time, even in cyclical times, so there’s little threat. here.
Ryder is led by a team of highly experienced administrators and managers, with an average age of 64 years on the Board of Directors, 91% leadership and nearly 50% of the industry. The combined leadership and control amounts to more than 220 combined years, many of which have been with the company from 1992-1993. Ryder is a company where many other people seem to decide to stay and grow, and that’s an advantage.
2Q22 necessarily showed Ryder’s positive thesis of existing trends. Each segment experienced something akin to a buildup: used cars sold more than twice sequentially in the quarter and used vehicle inventory well below their long-term expectations. SCS and DTS, the company’s expansion drivers, were able to achieve significant double-digit earnings and EBT earnings, at 28% and 76% respectively, through successful price pressures, new business and used car earnings.
FCF, which was negative in fiscal 2018-2019, has been positive for 3 years, with the corporate well above its RoE target.
IR Ryder (IR Ryder)
This company is worth a moment of its time, and also a momentary look.
Let’s take a look at the company’s valuation to see what kind of increase we can expect.
Ryder’s assessment shows impressive trends that contemplate the effects of the last 2 years. Lately we are trading at a combined P/E of 5. 4x; this is strongly impacted by strong post-pandemic earnings growth, which has driven double-digit EPS compared to what it was before COVID EPS of $4-6 for the company.
The question for Ryder is, to what extent can the company maintain its current EPS trajectory?If you can keep the trajectory even a little flat in the future, then Ryder is certainly an incredible investment because, at just $75 per share, it’s less than 6 times PHYSICAL EDUCATION.
However, EPS is expected to decline by 25% this year and then another 8% through 2024. Faced with this, Ryder may struggle to reach its percentage price.
For GAAP, we have S analysts
Dividend cuts are also expected.
Ryder EPS/Dividend Forecast (Ryder EPS/Dividend Forecast)
The festival for Ryder is pretty simple. A company might decide not to outsource control of its fleet or obtain from similar suppliers, and there is no shortage of festivals. It is a regional and national market, with many peers. Ryder competes with financial lessors, truck/trailer brands and independents. Distributors who provide answers and full-service products. Another legacy festival comes from controlled maintenance providers.
For SCS/DTS, the festival is different. Companies may decide to manage their own logistics and supply chains, but the peer scenario is more complex. There are full-service companies, but Ryder’s industry expertise is best known here. corporations offering Ryder facilities or similar facilities come with Old Dominion Freight (ODFL), J. B. Hunt (JBHT), Avis (CAR), Knight-Swift (KNX), Werner (WERN) and others.
However, Ryder has valuation benefits on each of them, hunting multiples of EBITDA and P/E.
I foresee at least the company’s ability to increase its EBITDA by 4-5% on a year-on-year basis, and that’s prudent. Street targets for Ryder are in the $75 to $90 range, averaging $85, though maximum. analysts (except 2) are in a cautious “HOLD” position right now, they are unwilling to invest in a company that may be about to see 2 consecutive years of declining earnings per share (EPS) in a potential recession.
Ryder rating/increase (FAST charts)
The position is understandable, but a bit too negative for my taste. I think the company is very capable of trading at a normalized P/E closer to its normalized EPS over the long term, which I think is closer to $8 to $9 than before. EPS would mean more than a triple-digit percentage value, even with a normalized EPS of $8/percent and more long-term. While it’s possibly too early to request a three-digit percentage value here, I think Ryder is worth more than $75/percent, which is the lowest existing target percentage value for the company.
So how much?
I would say you’re looking to pay less than $85 to $90 consistent with stocks, which makes the company’s current value very attractive. In fact, there is room for an upward improvement in existing valuation due to expectations for this year, and I wouldn’t say that the decline for the next 1 or 2 years is as clearly established or expected as I might suggest. The company tends to exceed expectations, and given the current state of the industry, I wouldn’t bet against one of the largest transportation/logistics corporations in its field.
For this reason, I started my Ryder canopy with a “BUY”. It’s not the most productive option on the market today, however, if you’re going into logistics and need to stay in the U. S. If you are in the U. S. , and not opt for anything like Deutsche Post (OTCPK:DPSGY), then it’s a wonderful choice.
Here is my thesis for Ryder.
My thesis for Ryder is as follows:
Remember, I mean:
These are my criteria and how the company meets them (in italics).
The corporate discussed in this article is only a prospective investment in the sector. iREIT members at Alpha have access to investment concepts with particularly higher/better returns than this. Remember to subscribe and stay informed here.
This article written by
36-year-old DGI investor/senior personal portfolio control analyst for several clients in Sweden. It invests in the United States, Canada, Germany, Scandinavia, France, the United Kingdom and BeNeLux. actions and be an authority on price investments as well as similar issues.
I am an iREIT contributor at Alpha as Dividend Kings here at Seeking Alpha and work as a senior research analyst for Wide Moat Research LLC.
Disclosure: I have/have a long advantageous position in the shares of R, DPSGY, whether through ownership of shares, features or other derivatives. I wrote this article myself and it expresses my own opinions. I don’t get any refunds for this (other than Seeking Alpha). I have nothing to do with a company whose actions are analyzed in this article.
Additional Disclosure: While this article may sound like money advice, please note that the writer is not a CFA or is otherwise written to give money advice. It would possibly be structured as such, but it is not money advice. Investors are required and expected to carry out their own due diligence and conduct their own research prior to any investment. Short-term trading, feature trading/making an investment, and futures trading are all potentially incredibly dangerous investment styles. Sometimes they are not suitable for someone with limited capital, limited investment experience, or lack of understanding of mandated threat tolerance. I own European/Scandinavian tickers (not ADR) of all European/Scandinavian corporations indexed in my articles. I own the Canadian symbols on all Canadian stocks I write about. Please note that making an investment in non-US/European stocks carries with it express withholding tax threats to the domicile of the company as well as its non-public circumstances. Investors deserve to consult a tax professional about the general effect of withholding taxes on dividends and tactics to mitigate them.