Ryder triggers economic alarm bells
Transport giant Ryder cuts its earnings forecasts, saying that economic weakness is spreading beyond housing and will continue.
NEW YORK (CNNMoney.com) -- Trucking and logistics company Ryder set off economic alarm bells Monday morning when it issued an earnings warning that it attributed to the economic slowdown spreading beyond housing and construction.
The meltdown in the mortgage and credit markets this summer, and the corresponding hit to the U.S. housing and home building markets, have been well documented by economists and investors. Many have also been anticipated that the problem may spread beyond those sectors.
Ryder, which manages and operates a fleet of more than 140,000 vehicles ranging from tractor-trailers to light-duty trucks for a wide variety of companies' transport needs, said that it is seeing a slowdown in business activity from its clients.
"Economic conditions have softened considerably in more industries beyond those related to housing and construction," its statement warned. "Consequently, freight and shipment levels have weakened to a greater extent than previously anticipated. The impact to earnings is primarily driven by softer-than-anticipated demand in the commercial rental product line, as well as from lower pricing and higher carrying costs associated with used vehicles."
The company said it is now looking at third quarter 2007 earnings per share in the range of $1.12 to $1.14, down from its earlier guidance of $1.20 to $1.23, although that would match or edge past the $1.12 a share it earned from operations a year ago.
Analysts surveyed by Briefing.com had a consensus EPS forecast of $1.22, and a range of estimates from $1.18 to $1.24.
The company also said it anticipates softer economic conditions to continue through the fourth quarter, and it therefore also cut its full-year earnings guidance to a range of $4.10 to $4.15, down from its earlier range of $4.30 to $4.35. The company earned $3.98 a share last year, and analysts had forecast that would rise to $4.31 before this warning.
Shares of Ryder, a component of the Dow Jones Transportation Average, fell about 5 percent in early trading. UPS (Charts, Fortune 500) and FedEx (Charts, Fortune 500) were little changed just after the market open on the warning, but other trucking and logistics companies such as YRC Worldwide (Charts, Fortune 500), Con-Way (Charts) and J.B. Hunt Transport Services, (Charts) were off between 0.6 and 1.8 percent in early trading.