Jefferies Upgrades Ryder Systems (R) to Buy, Traders Under-Estimate Their Potential
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Price: $62.59 -0.79%
Rating Summary:
12 Buy, 1 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 13
Rating Summary:
12 Buy, 1 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 13
Trade R Now!
Jefferies upgraded shares of Ryder Systems (NYSE: R) to a Buy rating from their previous rating of Hold as the believes that R's later-cycle leverage and below average fuel risk with help them outperform their competitors. They are raising their price target on the company to $$58 from $51.
Shares of R have typically traded with a 85% correlation to the Dow Jones Transportation Average, but is lagging 9.3% YTD despite them posting better than expected results for their 4Q, and-raise and seemingly limited downside risk to near-term estimates. Jefferies states that investors are more focused on the short-cycle pricing stories and are not paying attention to a solid company like R.
The firm reports that at its best, the company's spread between return on capital and cost of capital was roughly 120bps, which declined to a negative 150bps on average in 2010 and is predicted to increase to a negative 50bps in 2011.
Jefferies comments that, "Ryder’s earnings are still 50% below past-peak, the deepest decline across our coverage. Intermediate term, we estimate that Ryder’s forward-peak EPS power could be roughly $5.50 if it hits its targeted 8.0% return on capital (vs 4.8% in 2010 and 7.9% past-peak), and increases its debt-to-equity to 215%. This $5.50 of estimated forward-peak earnings power is 140% higher than $2.26 of EPS in 2010, and 20% higher than past peak of $4.54."
For more ratings news on Ryder Systems click here and for the rating history of Ryder Systems click here.
Shares of Ryder Systems closed at $47.20 yesterday, with a 52 week range of $36.54-$53.63.
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Shares of R have typically traded with a 85% correlation to the Dow Jones Transportation Average, but is lagging 9.3% YTD despite them posting better than expected results for their 4Q, and-raise and seemingly limited downside risk to near-term estimates. Jefferies states that investors are more focused on the short-cycle pricing stories and are not paying attention to a solid company like R.
The firm reports that at its best, the company's spread between return on capital and cost of capital was roughly 120bps, which declined to a negative 150bps on average in 2010 and is predicted to increase to a negative 50bps in 2011.
Jefferies comments that, "Ryder’s earnings are still 50% below past-peak, the deepest decline across our coverage. Intermediate term, we estimate that Ryder’s forward-peak EPS power could be roughly $5.50 if it hits its targeted 8.0% return on capital (vs 4.8% in 2010 and 7.9% past-peak), and increases its debt-to-equity to 215%. This $5.50 of estimated forward-peak earnings power is 140% higher than $2.26 of EPS in 2010, and 20% higher than past peak of $4.54."
For more ratings news on Ryder Systems click here and for the rating history of Ryder Systems click here.
Shares of Ryder Systems closed at $47.20 yesterday, with a 52 week range of $36.54-$53.63.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
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