R - Embedded Expectations Analysis - 2018 03 28
Ryder System, Inc. (R:USA) currently trades near historical averages relative to UAFRS-based (Uniform) Assets, with a 1.0x Uniform P/B. At these levels, the market has bullish expectations for the firm, but management has concerns about demand, earnings, and investmentsSpecifically, management may be downplaying concerns about declining miles driven per vehicle per day on U.S. lease power units, and may lack confidence in the sustainability of SelectCare fleet growth. Additionally, they may be concerned about declining earnings as a percentage of operating revenue in their Dedicated Transportation Solutions segment, and may also be concerned about higher-than-expected IT investment costs. Furthermore, they may lack confidence in their ability to drive improved commercial rental performance during the year, and may be downplaying concerns about overall forecasted growth in the economy
Ryder System is engaged in transportation and supply chain management solutions. The company's segments include: Fleet Management Solutions, which provides full service leasing and leasing with maintenance options, commercial rental, contract or transactional maintenance services, and fleet support services such as vehicle administration and fuel service; Supply Chain Solutions, which provides logistics management services, including distribution management, transportation management and other services; and Dedicated Transportation Solutions, which combines equipment, maintenance, drivers, administrative services and additional services to provide a dedicated transportation solution.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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