The Wings Of RyderBy
The going has been rough for Ryder System since the summer. The Big Board stock has been hitting bumps, falling from 34 in late July to around 28. But the smart-money crowd has started buying in. They think the decline is mainly due to some confusion over Ryder's plan to spin off its aviation-services division.
Indeed, the stock started slumping after the nation's largest lessor of trucks announced the spin-off in July. Ordinarily a spin-off is regarded as positive by investors. But there have been doubts as to how much revenue the unit could generate as a stand-alone company, considering the weakened airline business. Ryder is expected to distribute one share of the new company, to be called Aviall, for every four shares of Ryder.
Aviall should trade at 12, figures analyst Paul Schlesinger at Prudential Securities. He estimates that the new Ryder stock is worth "upwards of 28 a share." Aviall shares, which at 12 should be worth 3 in Ryder stock, give Ryder a total value of 31--and that's conservative, says Schlesinger. He sees the new Ryder earning $2.10 in 1994, up from an estimated $1.80 in 1993; Aviall should earn $1.30 a share. Schlesinger has raised his opinion on Ryder to "moderately attractive" from a hold.
One money manager at a New York bank believes the revamped Ryder stock is worth much more than 28. It should hit the mid-30s as the economy continues to strengthen, he says. He also thinks Aviall's stock could be worth 17 as the major airlines "outsource," or subcontract, their engine-repair work to other companies, such as Aviall, the largest independent engine-service outfit.
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