We are upgrading our rating to Outperform on Ryder System (R) following its second-quarter earnings. Second-quarter earnings surpassed the Zacks Consensus Estimate on stronger automotive volume, improved commercial rental demand and strong used vehicle sales.
Ryder is planning for a better relative freight pricing market and more freight opportunities in 2010. With an improvement in market conditions, the company has ample balance sheet strength to support its capital spending. Ryder is aggressively evaluating its pipeline of acquisition candidates along with fleet expansion and spending on equipment.
Further, the company remains committed to its shareholders via dividends and share repurchase. However, Ryder faces a prolonged freight recession on its lease business, which may impact near-term earnings.