The Ratings Game
Analysts cut Ryder on new outlook; shares slump6/22/12 12:11 PM ET (MarketWatch)
NEW YORK (MarketWatch) -- Shares of transportation and logistics provider
Ryder (R) revised its second-quarter earnings-per-share projection to between 90 cents and 95 cents, down from a range of $1.07 to $1.12 previously, citing weaker-than-expected demand for commercial vehicle rentals and "unusually high" costs for medical benefits, with the latter expected to dilute earnings by 5 cents a share.
For the year, the company said it now expects to earn between $3.65 and $3.85 a share, down from its previous outlook of $4.02 to $4.12.
At midday, shares of Miami-based Ryder lost nearly 13% to stand at $35.55.
As the company issued its updated forecast late Thursday, Chief Executive Greg Swienton said: "We are responding with timely and appropriate business adjustments and cost-management initiatives to address economic headwinds that are expected to continue through the remainder of the year."
Against this backdrop, Raymond James lowered its rating on Ryder to outperform from strong buy and slashed its price target to $45 from $62. It also trimmed its second-quarter profit estimate to 92 cents a share from $1.11, while pegging full-year earnings at $3.75 a share, down from $4.10.
Stephens Inc. downgraded its Ryder rating to equal weight from overweight and revised its price target to $42 from $65, reflecting weaker-than-expected commercial rental growth and less gains from the sale of equipment as the company tries to reduce its fleet inventory by selling wholesale instead of retail.
"In our opinion, these issues will limit near-term EPS growth and we find it hard to identify potential catalysts, aside from macro sentiment, on the horizon that could help move shares higher," said Stephens analyst Brad Delco in a note to clients.
KeyBanc Capital Markets mirrored the move, lowering its price target to $50 from $62 and reducing its second-quarter profit estimate to 93 cents from $1.10 a share and its full-year forecast to $3.70 from $4.07 a share.
However, KeyBanvc reiterated a buy rating on Ryder, arguing that the company's weaker outlook already is largely priced in at current levels. Ryder's updated forecast "incorporates proactive fleet and cost-reduction actions that should help reset expectations to achievable levels," analyst Todd Fowler wrote in a research note.
Rounding out the demotions, Wells Fargo lowered Ryder to market perform from outperform while revising its 6-to-12 month valuation range to $41 to $45, down from $62 to $65 previously.