Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
Big Wheels Keep On Turning by Christopher C. Williams
Summary: Ryder System (NYSE:R), known for its yellow rental trucks, has become less of a household name ever since it switched to commercial customers over a decade ago. The truck-leasing and logistics company, a leader in the $295 billion supply-chain logistics market, opted for a more predictable business, one which generated $6 billion in revenue last year. It expects this number to grow by about 7% a year, and for earnings per share to grow by 10% to 15%. These figures should help investors regain confidence, as concerns over a slow economy have brought the shares down to around $49, after having reached $59 last June. The shares are now trading at an inexpensive 10x estimated earnings for 2008, at $4.81. Management has consolidated operations and practiced pricing discipline such that the company should do well as the freight business stabilizes, and as long-term lease contracts signed last year bring in revenue. CEO Greg Swienton explains, "Ninety percent of our business is contractual and therefore less susceptible to the economy. Large investors get it, but individual investors might not."