Last week saw the newest quarterly earnings release from Ryder System, Inc. (NYSE:R), an important milestone in the company's journey to build a stronger business. Ryder System beat expectations by 7.1% with revenues of US$2.2b. It also surprised on the earnings front, with an unexpected statutory profit of US$0.68 per share a nice improvement on the losses that the analysts forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Ryder System after the latest results.
Following the latest results, Ryder System's eight analysts are now forecasting revenues of US$8.72b in 2021. This would be a satisfactory 2.8% improvement in sales compared to the last 12 months. Ryder System is also expected to turn profitable, with statutory earnings of US$3.64 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$8.49b and earnings per share (EPS) of US$4.70 in 2021. So it's pretty clear the analysts have mixed opinions on Ryder System after the latest results; even though they upped their revenue numbers, it came at the cost of a pretty serious reduction to per-share earnings expectations.
Curiously, the consensus price target rose 10% to US$54.86. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Ryder System at US$68.00 per share, while the most bearish prices it at US$44.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Ryder System's revenue growth will slow down substantially, with revenues next year expected to grow 2.8%, compared to a historical growth rate of 7.3% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 8.9% next year. Factoring in the forecast slowdown in growth, it seems obvious that Ryder System is also expected to grow slower than other industry participants.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Ryder System. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Ryder System going out to 2022, and you can see them free on our platform here.
Even so, be aware that Ryder System is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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