Mr. Market loves consistency. Unless I miss my guess, he's going to love Ryder (NYSE:R) tomorrow, too. Over the past five years, Ryder has managed to avoid missing consensus analyst estimates in every quarter but one. Aside from that slip (in Q1 2004), the company has consistently beaten expectations in each of the past 20 quarters. Will it do so again in tomorrow's Q4 and FY 2005 release? Bet on it.

Wall Street Wisdom:

  • General consensus. Seven analysts ride along on this one: five holds and a pair of sells.
  • Revenues. Analysts predict that Ryder will report 13% growth in sales year over year, for a total of $1.54 billion in Q4.
  • Earnings. They also expect strong profits from Q4, rising nearly 15% to $0.94.

Margin watch:
This company achieves ever-higher profits from a growing stream of revenues. Although gross margins have sagged over the past 18 months, Ryder has held the line on operating and net margins for the past year. Although it still squeezes the same number of profitable pennies out of each sales dollar, it's collecting more and more dollars to squeeze.

Margins %

6/04

9/04

12/04

3/05

6/05

9/05

Gross

46.1

45.5

44.8

44.2

43.5

42.9

Op.

6.8

7

7.2

7.2

7.2

7.3

Net

3.6

3.8

4.2

4.2

4.1

4.2

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

Foolish lookout:
I see two primary factors that Ryder investors need to consider going forward. First, the company made sizeable increases in its capital expenditures in the first three quarters of 2005. As an immediate result, Ryder went free cash flow-negative in 2005, after generating $162 million in positive free cash flow over the first nine months of 2004. As those investments get depreciated in future quarters, you should expect them to begin to weigh upon GAAP profits.

Second, back in October Ryder announced plans to buy back $175 million worth of its stock. Then, one of two things happened: Either the market reacted to this announcement by bidding the shares too high for Ryder to begin its buyback, or Ryder began buying hand over fist, driving the share price up by more than $10. Which was it? Tomorrow we should find out.

Fool contributor Rich Smith does not own shares of Ryder.