Ryder System R is facing significant freight market challenges. Escalating operating expenses are adversely affecting the company’s bottom line, making it an unattractive choice for investors’ portfolios.

Let’s delve deeper.

Ryder: Key Risks to Watch

Southward Earnings Estimate Revision:The Zacks Consensus Estimate for current-year earnings has moved 1.8% south in the past 60 days. For the next year, the consensus mark for earnings has been revised 1% downward in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Dim Price Performance:  The company’s price trend reveals that its shares have dropped 6% over the past month compared with the industry’s7.3% decline.

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Weak Zacks Rank: Ryder currently carries a Zacks Rank #4 (Sell).

Bearish Industry Rank: The industry to which R belongs currently has a Zacks Industry Rank of 146 (out of 248). Such an unfavorable rank places it in the bottom 41% of Zacks industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.

A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Reckoning the industry’s performance becomes imperative.

Headwinds: Weak freight market conditions are severely impacting Ryder’s prospects. The Fleet Management Solutions segment has been experiencing weak rental demand. For example, rental utilization dropped from 75% in the fourth quarter of 2023 to 73% in the fourth quarter of 2024. High operating costs are also hurting Ryder’s bottom-line performance.  For example, the cost of services increased 9% year over year in the fourth quarter of 2024.

Moreover, R’s financial stability is challenged by increased operating expenses and weak liquidity. The company exited the December-end quarter with a current ratio (a measure of liquidity) of 0.75. A current ratio of less than 1 is not desirable as it does not indicate that the company holds sufficient cash to meet its short-term obligations.

Stocks to Consider

Investors interested in the Zacks Transportation sector may consider Golar LNG Limited GLNG and SkyWest SKYW.

Golar LNG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  GLNG has an expected earnings growth rate of 16.1% for the current year.

The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average beat of 30.2%. Shares of GLNG have surged 87.1% in the past year.

SkyWest currently sports a Zacks Rank #1 and has an expected earnings growth rate of 16% for the current year.

The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 16.7%. Shares of SKYW have climbed 57.6% in the past year.

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Ryder System, Inc. (R) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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