Whether a man is a criminal or a public servant is purely a matter of perspective."― Tom Robbins, Another Roadside Attraction
The market continues to be volatile as fears around Covid-19 continue to be the dominant headwind for equities. After posting the worst weekly performance since the financial crisis last week, stocks thankfully found their footing on the first trading day of March as the Dow advanced more than 1,200 points Monday.
As I look for new opportunities for the cash allocation within my personal portfolio, I am scouring insider activity to see what stocks those 'in the know' are picking up on this big pullback. Today, we look at some significant new insider buying in beaten down Ryder System (NYSE:R).
Company Overview
Ryder System is headquartered just up the road from me here in Miami. The company provides transportation and supply chain management solutions worldwide. Ryder operates through three segments: Fleet Management Solutions, Dedicated Transportation Solutions (DTS), and Supply Chain Solutions. Over the years, the company has become a full service logistics provider, although it is mainly known for its yellow trucks. With the recent pullback in the shares, the stock has market capitalization of approximately $2 billion.
Recent News
The company posted a mixed Q4 in mid-February with flattish with a loss of one cent a share on a non-GAAP basis, a bit below the consensus. Revenues rose one percent on a year-over-year basis to $2.28 billion, a bit over the consensus. However, the stock took a hit when management lowered FY2020 guidance significantly. Leadership now sees FY2020 EPS coming in between $1.10 to $1.50 a share. The consensus forecast from analysts prior to that revised guidance was just north of $2.50 a share.
Source: Company Presentation
Insider Activity & Analyst Commentary
Analysts are not currently sanguine on Ryder's prospects after its disappointing Q4 results on February. JP Morgan lowered its price target five bucks a share to $42 and reiterated its Sell rating. Stephens kept its $47 price target on Ryder but maintained its Hold rating. SunTrust Robinson did reissue their Buy rating on Ryder but lowered its price target on the stock to $55 from $60 a share.
Insiders seem to be more optimistic on the company's longer-term direction based on insider activity last week. In the first insider moves so far in 2020, an EVP and insider bought nearly $100,000 worth of new shares on February 25th. That same day, the CFO bought just under $490,000. This followed a CEO purchase of $515,000 worth of stock the day before with another director picking up $120,000 in new equity that day as well.
Valuation
Ryder does not appear cheap on a P/E basis, especially on lowered guidance. Analysts currently forecast EPS popping back into an approximate $2.75 to $3.50 a share range in FY2021 for Ryder. However, I would take that far out forecast with a big grain of salt for right now.
The stock does sell for under book value and just over 20% of annual sales which does appear cheap. In addition, the shares currently pay nearly a six percent dividend yield. That should put a floor under the shares, provided that payout can be sustained which one recent article here on Seeking Alpha looked at in more depth.
Verdict
The insider buying in this name after the shares is encouraging. However, until Covid-19 fears ebb, this is a sector of the market that is likely to remain under pressure. In addition, given the company pays out $2.24 a share in dividends annually, I would not be shocked to see a potential dividend cut at some point in 2020. Given those two worries as well as the company's current challenging environment, I am passing on making any investment recommendation on Ryder while noting recent insider activity does meet the 'significant' threshold.
Our crime against criminals lies in the fact that we treat them like rascals."― Friedrich Nietzsche
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
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