A leading provider of integrated logistics and commercial transportation solutions worldwide, Ryder System Inc. (R) ordered 202 heavy-duty natural gas trucks. These trucks will not only reduce emission but also pull down costs as natural gas fuel prices are much lower than diesel prices, which are steeply rising.
With this order, the company has embarked upon the largest commercial natural gas truck project in North America. The project aims at delivering environmentally sound and cost effective transportation solutions, and popularizing alternative fuel programs for large commercial truck operations.
The delivery of the trucks will begin in April and be completed by September. Currently, Ryder plans to initiate the first of the three existing maintenance facilities in its network to support indoor servicing of natural gas vehicles and will soon commence construction of two natural gas fueling stations.
The ordered vehicles are part of the San Bernardino Associated Governments (SANBAG) project conducted by Ryder, under an agreement with Southern California Association of Governments (SCAG) Clean Cities Coalition.
This heavy-duty natural gas truck rental and leasing project in Southern California will be saving over 1.5 million gallons of diesel per annum, with 100% domestically produced low-carbon natural gas. Additionally, the project will maintain and create over 400 U.S. green automotive jobs in the region, which was hit hard during economic downturn.
The project will cost approximately $38.7 million and will be financed by joint public/private industry partnership between the U.S. Department of Energy, the California Energy Commission, and Ryder.
Ryder will fund $19.4 million of the total investment through its capital and the remaining $19.3 will be financed by state and federal sources. These funds include $9.95 million from the U.S. Department of Energy’s Alternative Fuel and Advanced Vehicles Pilot Program and $9.3 million via the California Energy Commission’s Alternative and Renewable Fuel & Vehicle Technology Program
Over the long term, Ryder plans to invest strategically in commercial rental vehicles, maintenance technology, rental fleets, sales and information technology initiatives.
These investments are expected to propel revenue and earnings growth in future years. Additionally, a sound balance sheet would facilitate the company to expand its footprint through more acquisitions and gain more market share than competitors like Con-Way Inc. (CNW).
Currently, we maintain our long-term Outperform recommendation on Ryder. The company holds a Zacks #3 Rank, which translates into a Hold rating over the short term.
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