KeyBanc analyst Todd Fowler upgraded Ryder System (R) on his view of an improving earnings path after channel checks indicate near-term rental activity is at the high end of seasonal variations. Meanwhile, his peer at Morgan Stanley cut his rating for Hertz (HTZ) to Underweight following the doubling of shares over the last few months, calling the rise in rental rates in the wake of U.S. hurricanes an opportunity to sell the stock.

BUY RYDER: KeyBanc's Fowler upgraded Ryder to Overweight from Sector Weight, with a $100 price target. The analyst told investors that channel checks suggest near-term rental activity is at the high end of seasonal variations partially aided by weather-related demand, with leasing steady and used truck activity increasingly stable. Further, the analyst noted he estimates 25c-45c of earnings benefit in 2018 from reduced valuation adjustments and accelerated depreciation, partially offset by lower residuals. Combined with favorable first half of 2018 rental comps, Fowler sees an improved earnings path relative to current 2018 consensus.

SELL HERTZ: This morning, Morgan Stanley analyst Adam Jonas downgraded Hertz to Underweight from Equal Weight, while raising his price target on the stock to $14 from $12, following the doubling of shares over the last three months. The analyst noted that the "strong run" in the share price was due to anticipating of tailwinds to volume, pricing and used car prices following the storms in Texas and Florida. He recommended using this opportunity to reduce exposure to the shares. Moreover, Jonas argued that Hertz has a nearly identical level of downside to Avis Budget (CAR), which also has an Underweight rating at Morgan Stanley. The analyst sees the fundamental outlooks of both Hertz and Avis Budget - as stand-alone traditional car rental companies - as extremely challenged. Overall, Jonas acknowledged that destructive weather events present a material short-term increase to pricing but he believes structural issues with the car rental model remain.

WHAT'S NOTABLE: In a research note of his own, Credit Suisse analyst Anjaneya Singh argued that while difficult to assess when exactly the market will normalize, he believes Hurricane Harvey and Irma could serve to be net positive impacts for Hertz and Avis Budget in the near-term. However, the analyst told investors that he views the recent rally in the shares as overdone. Moreover, Singh pointed out that he believes the inability of the industry to offset fleet costs via pricing, for the foreseeable future, has not changed. He reiterated a Neutral rating on Avis Budget, and Underperform rating on Hertz.

PRICE ACTION: In late morning trading, shares of Ryder have gained over 2% to $80.29, while Hertz stock has dropped more than 11% to $21.23.