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Is a Beat in the Cards for Ryder (R) Stock in Q4 Earnings?


Ryder System, Inc. R is scheduled to report fourth-quarter 2017 results on Feb 16, before the market opens.

Last quarter, the company reported a positive surprise of 3.1%, beating on both earnings and revenues. The top line also increased substantially year over year with growth witnessed in all segments.

Let’s see, how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Ryder is likely to beat on earnings with the perfect combination of the following two key ingredients:

Zacks ESP: Ryder has an Earnings ESP of +0.37%. This is because the Most Accurate estimate of $1.36 per share is higher than the Zacks Consensus Estimate of $1.35. Moreover, a positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ryder holds a Zacks Rank #2 (Buy), which increases the predictive power of ESP. Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating estimates.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Ryder System, Inc. Price and EPS Surprise

Ryder System, Inc. Price and EPS Surprise | Ryder System, Inc. Quote

Reasons for Better-Than-Expected Earnings

The company’s efforts to reward shareholders through dividends and share buybacks are encouraging. In December 2017, the company’s board of directors cleared a new share repurchase program. Ryder's trailing 12-month return on equity (ROE) supports its growth potential. The company’s 10.7% ROE compares favorably with its industry’s ROE of 8.4%, underlining its efficiency in using shareholders’ funds.

Ryder’s efforts to grow its lease fleet are a further positive. Its strong customer base also bodes well for the company and is anticipated to boost results in the to-be-reported quarter.

Shares of Ryder have performed well in the last three months on the back of the above tailwinds. The stock has gained 5.2% against the industry’s decline of 1.3%.

However, high operating expenses and a weak rental demand market are expected to hurt the company’s fourth-quarter results. Adjusted earnings per share in the soon-to-be-reported period are likely to be in the band of $1.31-$1.41. This is way below the figure, recorded in fourth-quarter 2016. Additionally, Ryder’s high-debt levels pose a threat to its results.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider a few other stocks like Atlas Air Worldwide Holdings AAWW, Copa Holdings, S.A. CPA and Gol Linhas Aereas Inteligentes S.A. GOL.

Atlas Air Worldwide has an Earnings ESP of +0.48% and a Zacks Rank of 2. The company will report fourth-quarter earnings on Feb 22.

Copa Holdings has an Earnings ESP of +1.84% and a Zacks Rank #3. The company is scheduled to release fourth-quarter results on Feb 21.

Gol Linhas is a Zacks #3 Ranked player and has an Earnings ESP of +356.52%. The company is slated to announce fourth-quarter results on Mar 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

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