Fitch Ratings does not view Ryder System Inc.'s (Ryder, rated 'A-/F1')
recently announced downward earnings revisions for second-quarter 2012
(2Q'12) and full-year 2012 as posing rating concerns at this time.
The lowered guidance, which primarily reflects declining commercial
rental demand, and lower gains associated with reducing excess used
vehicle inventory, is mitigated by leverage maintenance within the
management-articulated target of 2.5x-3.0x and the proactive nature of
steps taken by the company to manage its used vehicle inventory.
Ryder's commercial rental revenue is up year over year, and seasonally;
however, results from May 2012 reflect lower growth than Ryder
originally anticipated. As such, the size of the rental fleet will be
reduced, which will increase used vehicle inventories. The excess
inventory is expected to be disposed of through the wholesale channel
which typically yields lower proceeds, and thus lower gains on sale of
equipment, versus the retail channel. Ryder also experienced unusually
high medical benefit-related expenses during 2Q'12, which are expected
to be non-recurring.
The company has reduced its forecast in the full-service lease segment
as a precaution, given lower expectations in the broader economy,
although the segment has performed in line with expectations to date. In
an effort to address the slower than expected demand, Ryder is
implementing cost reduction initiatives in a proactive step to better
align revenues with costs. A $0.10 per share restructuring charge will
be taken during the year related to the restructuring; however, Ryder
expects the cost reductions to provide annual savings of $0.35 per share.
Established in 1933 and headquartered in Miami, Florida, Ryder is one of
the world's largest providers of highway transportation services. As of
Dec. 31, 2011, the company had 169,900 vehicles in its fleet and $6.1
billion of annual revenues. Ryder's stock is listed on the NYSE under
the ticker 'R'. Ryder's 'A-/F1' ratings were last affirmed on March 16,
2012 with a Stable Rating Outlook.
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