FBR Capital Cuts Price target on Ryder System (R) to $115 Following 3Q Pre-Announcement

FBR Capital reiterated an Outperform rating on Ryder Systems (NYSE: R), and cut the price target to $115.00 (from $130.00), following the company's 3Q15 pre-announcement. Used truck sales slowed for Ryder, particularly in September, and sales for the quarter fell 7% below Ryder's projections. After a very robust 1H15, used truck pricing moderated back more in line with 2014 levels.

Analyst John Mims commented, "We are adjusting our earnings model and lowering our price target on R to $115 from $130 following the company's 3Q15 preannouncement, but still strongly reiterate our Outperform rating and bullish view. We would be strong buyers on any related weakness here, and on a longer-term perspective, believe there are more positives than negatives in this guidance cut. This is the strongest year in history for growth in Ryder's lease fleet, and we expect this robust growth trend to continue for several more years, but the company is understaffed from a maintenance tech perspective. Short on labor, lease maintenance is triaged ahead of rental maintenance, so while rental demand has remained extremely robust (unlike in the 2Q12 preannouncement, which was demand driven), utilization has slipped as trucks are out of service for maintenance. This is a problem that has been solved, according to Ryder management, and while the impact will bleed into 4Q15, we expect no lingering impacts in 2016. Additionally, the used truck market clearly slowed in September for Ryder, and while negative impacts here could be a bit longer tailed, we expect this to be somewhat offset by residual value gains in 2016."

For an analyst ratings summary and ratings history on Ryder Systems click here. For more ratings news on Ryder Systems click here.

Shares of Ryder Systems closed at $75.65 yesterday.

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