Ryder rejects HG Vora’s takeover offer

At the time of its 13D filing, HG Vora said it owned about 9.9% of Ryder.

At publication time, HG Vora had not responded to an email request for comment by FreightWaves. 

In its note to investors, Vertical Partners said its valuation of Ryder on a “sum of the parts” basis  puts Ryder stock at $150 per share. Vertical Partners bases its view in part on the valuations of the Dedicated Transportation Services and Supply Chain Solutions divisions, which together constitute a little less than 50% of the total business, with the better-known leasing business constituting the balance. Some analysts have said the sum of the parts valuation of Ryder puts correct numbers on DTS and SCS, which the street value of the company’s stock is missing. 

“While [the $150 price] feels excessive in the current environment, that is where the peer group multiples go for the DTS and SCS divisions,” Vertical Partners said in its note. “We believe we may have to get to the other side of a pending economic slowdown to get investors to pay attention to that kind of valuation work.”

Before the investors meeting Friday, Ryder put out a revised forecast for the second quarter and full-year 2022. In that forecast, Ryder said it had increased its second-quarter outlook for the company to earnings per share of $4.37 to $4.62 on a GAAP basis. That estimate had been $3.50 to $3.75. The company earned $3.35 in the first quarter. 

For the full year, Ryder’s GAAP EPS estimate was increased to $13.23-$14.23 from $12.83-$13.83. 

Given that forecast, Vertical Partners worked back to projected EBITDA for the company and said that while the $150 might be excessive for now, “a more appropriate valuation multiple on the company’s fundamentals at EBITDA multiples between 4.0x-5.0x warrants valuations over $100.”

In a report on the investors event presentation, Todd Fowler of KeyBank said Ryder’s estimated increase in earnings was supported by a “benefit of maintenance initiatives” and stronger margins in new leases. About 60% of the company’s lease book remains to be repriced, he said. 

Ryder told the investors that in the SCS and DTS divisions, “continued growth and normalized margins … are expected to contribute an additional $1.20 per share, while aiding mix and returns immediately,” Fowler said.

Fowler said KeyBank remains “incrementally constructive” on Ryder in part because of “ongoing efforts to shift mix to higher return supply chain and dedicated offerings.” KeyBank kept its rating  at Sector Weight.

In its report, Vertical Partners said Ryder had reviewed plans to have “more modest fleet growth over the next cycle with a focus on straight truck diversification versus tractors.”

“We believe Ryder overgrew last cycle and spent too heavily on new equipment, which was under-depreciated and underpriced as a result,” the note authored by analyst Jeff Kauffman said. 

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