Ignore the news out of Ryder at your own peril. As I mentioned yesterday, trucking is one of the best barometers of economic health. If the economy and earnings improve we are certain to see higher trucking volumes and better outlooks from these firms. Thus far, we are seeing continued weakness and future pessimism across the board. FedEx was downbeat, Conway was downbeat, YRCW was downbeat and now Ryder is downbeat. The company released a 8-K today:
The Company anticipates the current worsened economic environment to continue throughout the remainder of 2009. These weaker conditions are expected to result in significantly lower than anticipated FMS results. Due to overall lower transportation volumes, the Company now anticipates miles driven, fleet count, and fuel volumes within Ryder’s full service lease and contractual maintenance product lines to be lower than previously planned. To a lesser extent, the Company anticipates additional deterioration in commercial rental demand and used vehicle pricing beyond prior expectations.
The Company also anticipates reduced net capital expenditures relative to the previous forecast due to lower expected levels of new lease sales and replacements, partially offset by lower proceeds from the sale of used vehicles. The Company now anticipates full year 2009 free cash flow to improve from the previous forecast because of lower net capital expenditures, lower expected pension contributions, and reduced cash taxes due in part to recent government economic stimulus packages.
Commenting on the Company’s announcement, Ryder Chairman and Chief Executive Officer Greg Swienton said: “For the past two-and-a-half years we have been in a freight recession which primarily impacted Ryder’s transactional product lines. During the first quarter, we saw further material reductions in freight volumes. As a result of this more severe downturn in freight activity, we’re now seeing reductions in Ryder’s lease product line resulting in fewer leased units and lower usage of the vehicles currently under contract. We expect these impacts to continue throughout the year. While Ryder’s earnings are negatively affected by these lower volumes, the Company’s strengthened business model is expected to provide additional increased free cash flow, which is paramount in the current environment.”
Forget the Pulte news, the uptick rule news, etc. This is the only thing you need to read. The economic weakness will continue throughout 2009.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.