Ryder System (R) To Report Q2 Earnings: Is A Beat In Store?

Florida-based Ryder System, Inc. (NYSE:R) , one of the world's largest providers of integrated logistics and transportation solutions, is scheduled to report second-quarter 2017 results on Jul 26, before the market opens.

Last quarter, the company’s earnings failed to surpass the Zacks Consensus Estimate by a substantial 2.4%. Ryder has outpaced estimates in two of the past four quarters, with an average earnings miss of 5.9%.

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 earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Ryder has an Earnings ESP of +3.23%. This is because the Most Accurate estimate stands at 96 cents, higher than the Zacks Consensus Estimate of 93 cents. A positive Earnings ESP is a meaningful and leading indicator of a likely positive earnings surprise.

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

However, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The combination of the company’s Zacks Rank #2 and +3.23% ESP makes us reasonably confident of a positive earnings beat on Jul 26.

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 grow its lease fleet are impressive. The continuous rise in ChoiceLease revenues is encouraging, which is driving growth at Ryder's primary division – Fleet Management Solutions. The company is poised to achieve or even exceed its 2017 guidance for lease fleet growth of 3,500 vehicles.

Ryder’s efforts to reward its shareholders through dividend payments look promising. In Jul 2016, the company hiked its quarterly cash dividend by 7.3% to $0.44 per share. This was the twelfth hike by the company since 2005. It continues to boost shareholders wealth by paying uninterrupted dividend for more than 40 years.

The company's strong customer base is also a positive. Moving ahead, we believe Ryder's top line in the second quarter should benefit from a strong product portfolio.

However, softness pertaining to commercial rental demand might hurt overall results. Furthermore, the demand for used vehicles is expected to remain soft until mid-2018. The company's high debt levels also raise concerns.

The price performance of Ryder System was depressing for the last six months. The stock witnessed a loss of 3.2% as opposed to 6.9% growth of its industry.

Other Stocks to Consider

Here are some other companies from the above industry you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Skywest, Inc, (NASDAQ:SKYW) has an earnings ESP of +3.45% and holds a Zacks Rank #1. It is scheduled to release second-quarter 2017 results on Jul 27.

Copa Holdings, S.A. (NYSE:CPA) has an earnings ESP of +5.04% and sports a Zacks Rank #2. The company is scheduled to release second-quarter 2017 results on Aug 9.

American Airlines Group, Inc. (NASDAQ:AAL) has an earnings ESP of +2.19% and carries a Zacks Rank #1. The company is expected to release second-quarter 2017 results on Jul 28.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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