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Monday, October 08, 2007

Yo' Mama Done Told You!

Ryder misses 3rd qtr forecasts, cuts full year:
Ryder System Inc., the largest U.S. truck-leasing company, said third-quarter earnings were less than it forecast because a weakening economy cut demand for commercial trucks.
Ryder blamed its fleet-management business, which provides trucks and services such as fueling and maintenance to commercial customers. Those include retailers such as Wal-Mart Stores Inc. and Home Depot Inc., said Todd Fowler, a KeyBanc Capital Markets analyst. That business accounted for $2.03 billion, or 62 percent, of Ryder's $3.25 billion in first-half revenue.
``Economic conditions have softened considerably in more industries beyond those related to housing and construction,'' Ryder said in the statement. ``Consequently, freight and shipment levels have weakened to a greater extent than previously anticipated.''

Just wait until the NAFTA trucking rules go into full effect and the Mexican trucking companies undercut Ryder right when things are worst. And don't imagine Walmart won't jump all over a Mexican contract.

But, of course, you correctly use Ryder as a canary in the general economy.
Rob - I plan to stay off the highways if the Mexican trucks ever do start rolling through. As for Ryder, the import of the company's statements is that they are seeing a downturn in their retail side business. That's after WalMart has undertaken a huge expansion? True, they cut back their expansion plans earlier this year, but.... I mean, less trucks for more stores can mean only one thing, right?

I laughed myself silly this morning reading about St Joe's plans to sell its Florida land:
``This is not a fire sale,'' Chief Executive Officer Peter Rummell said today on a conference call. ``We are not dumping stuff on the market and we are not going to make stupid decisions but there are things that we believe have reached their height in pricing. I firmly believe that we would be doing this whether the market was good or bad.''
``We're not selling land now,'' Rummell said on the conference call. ``We're carving it out and identifying it and we'll sell at an appropriate price at an appropriate time. We have been able to articulate 100,000 acres that we think over a reasonable time frame is close to its reasonable value and based on pure economics it doesn't make sense to hold on to.''

Hardeharhar. The implication being that the other 700,000 acres is still appreciating?

I think I've decided awareness at the current venture is truly painful, so one might as well laugh oneself through it. Oil's topped out, wheat has topped out. What an obelisk economy.
It has been sad to see St Joe go from a reliable company to a "player." Been watching it for some time. If the land is "reasonably valued" now but not worth holding why on earth would anyone want to buy it? The answer is the same as it has been for so many HBs. They are trying to claim insolvent is merely illiquid. Now St Joe does has a better argument on this point but still this is "eating their seed corn." St Joe also does some soft pine lumber if I recall. Could it be that they are in a triple squeeze; housing, land values, comercial products to housing, etc?
I don't know, Rob. It looks like a fire sale to me. Turn your acute mind to this:
The company plans to transfer by the end of the year the operations of its hospitality, recreational and golf assets to companies that focus on those types of business. St. Joe said it will transfer 500 workers to those companies, It will also transfer or eliminate another 260 jobs by the end of next year.

St. Joe will replace its dividend with a share buyback program. It has paid a quarterly dividend of 16 cents a share since the third quarter of 2005.

Earlier this year, St. Joe sold 31,000 acres of rural land in the Florida Panhandle and 15 office buildings as part of a strategy to quit home construction and building management. It also sold the Sassy Burbank homebuilding operation in the Mid-Atlantic states.

I follow Martin Marietta Materials as a proxy for suppliers. They were able to jack up pricing 10-15% this year, but did say that they thought the environment next year wouldn't permit it. So they lost about 15% of volume and made it up in pricing.
If it's all going south, why is the stock market so strong?
Relative value. Money under Management trapped domestically is very high, which is unsurprising given demographics.

I'm thinking that funds are going to be scrambling now. It's somewhat harder to make money with commodities. Gotta keep that bubble rolling somehow!

The trick is to keep the adjustment in the overall economies slow so that changes in investment have a chance to bear fruit.
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