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Ryder's Shares Up 11% in 6 Months Despite Coronavirus Woes
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Despite being under pressure due to coronavirus-led woes impacting rental demand, Ryder System’s (R - Free Report) shares have held up well over the past six months, gaining 11% against the industry’s 1.4% decline.
Reasons Behind the Upsurge
With the company lowering investments in lease and rental fleets due to reduced demand as a result of coronavirus, capital expenditures are decreasing. This is supporting its bottom line as evidenced by the narrower-than-expected loss incurred in the second quarter of 2020.
Moreover, the reduction in capital expenses is positively impacting its free cash flow. With capital expenditures declining 72.7% year over year in the first half of 2020, free cash flow came in at $612 million in the period against a negative free cash flow of $909 million in the year-ago period.
Anticipating low lease-sales activity due to the coronavirus pandemic, the company has reduced its gross capital expenditure forecast to $1-$1.3 billion for 2020 compared with $2.1 billion predicted previously. In the year-ago period, capital expenditures were $3.6 billion. Due to the estimated reduction in capex, Ryder expects free cash flow of $1-$1.2 billion in 2020 against negative free cash flow of $1.1 billion in 2019.
A strict check on costs to combat the coronavirus-related adversities also drove shares of the company. Temporary furloughs of employees, reduced discretionary spending and low medical expenses led to cost savings of $35 million in the second quarter. In July, the company trimmed its workforce primarily in Fleet Management Solutions. This is expected to generate savings of $12 million per quarter. Additionally, the company expects annual savings of $30 million in the current year from its multi-year maintenance initiative.
Zacks Rank & Key Picks
Ryder currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) , Knight-Swift Transportation Holdings Inc (KNX - Free Report) and Landstar System Inc (LSTR - Free Report) . While Canadian Pacific carries a Zacks Rank #2 (Buy), Knight-Swift and Landstar sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Canadian Pacific, Knight-Swift and Landstar have rallied 17.2%, 28.2% and 18.1% so far this year, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Ryder's Shares Up 11% in 6 Months Despite Coronavirus Woes
Despite being under pressure due to coronavirus-led woes impacting rental demand, Ryder System’s (R - Free Report) shares have held up well over the past six months, gaining 11% against the industry’s 1.4% decline.
Reasons Behind the Upsurge
With the company lowering investments in lease and rental fleets due to reduced demand as a result of coronavirus, capital expenditures are decreasing. This is supporting its bottom line as evidenced by the narrower-than-expected loss incurred in the second quarter of 2020.
Moreover, the reduction in capital expenses is positively impacting its free cash flow. With capital expenditures declining 72.7% year over year in the first half of 2020, free cash flow came in at $612 million in the period against a negative free cash flow of $909 million in the year-ago period.
Anticipating low lease-sales activity due to the coronavirus pandemic, the company has reduced its gross capital expenditure forecast to $1-$1.3 billion for 2020 compared with $2.1 billion predicted previously. In the year-ago period, capital expenditures were $3.6 billion. Due to the estimated reduction in capex, Ryder expects free cash flow of $1-$1.2 billion in 2020 against negative free cash flow of $1.1 billion in 2019.
A strict check on costs to combat the coronavirus-related adversities also drove shares of the company. Temporary furloughs of employees, reduced discretionary spending and low medical expenses led to cost savings of $35 million in the second quarter. In July, the company trimmed its workforce primarily in Fleet Management Solutions. This is expected to generate savings of $12 million per quarter. Additionally, the company expects annual savings of $30 million in the current year from its multi-year maintenance initiative.
Zacks Rank & Key Picks
Ryder currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Canadian Pacific Railway Limited (CP - Free Report) , Knight-Swift Transportation Holdings Inc (KNX - Free Report) and Landstar System Inc (LSTR - Free Report) . While Canadian Pacific carries a Zacks Rank #2 (Buy), Knight-Swift and Landstar sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Canadian Pacific, Knight-Swift and Landstar have rallied 17.2%, 28.2% and 18.1% so far this year, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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