(R) Ryder System Leases Natural Gas Trucks

Ryder System Inc. (R) has announced that it has entered into a lease agreement for 87 heavy-duty natural gas trucks with customers. The company did not disclose any financial detail of the contract but mentioned that 65 of the trucks belong to Ryder’s current natural gas fleet of 70 vehicles in Southern California. The remaining 22 vehicles are leased to Golden Eagle Distributors Inc. in Arizona.

The natural gas fleet is part of the San Bernardino Associated Governments (SANBAG) project conducted by Ryder. The SANBAG project was formed under an agreement with Southern California Association of Governments Clean Cities Coalition.

Ryder is entitled to a total of 202 natural gas vehicles under the SANBAG project, which is worth $38.7 million and marks the largest commercial natural gas truck project in North America. The company will also receive three natural gas compliant maintenance shops in Rancho Dominguez, Orange, and Fontana, and two fueling stations through SANBAG. While Ryder has received only 70 of these vehicles, the rest will be delivered by this year end.

This heavy-duty natural gas truck rental and leasing project will be save 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 the recent economic downturn.

Over the long term, Ryder plans to invest strategically in commercial rental vehicles, maintenance technology, rental fleet, 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, a leading provider of integrated logistics and commercial transportation solutions worldwide. The stock has a Zacks #2 Rank (Buy) for the short term.

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