Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ryder System Inc (R, Financial) reported double-digit earnings growth in each of its business segments for the fourth quarter of 2024.
- The company achieved a return on equity of 16%, demonstrating resilience during an extended freight cycle downturn.
- Operating revenue grew by 8% in 2024, driven by strategic acquisitions such as Cardinal Logistics and IFS.
- Ryder System Inc (R) returned $456 million to shareholders through share repurchases and dividends in 2024.
- The company's transformed business model has resulted in a significant shift towards asset-light businesses, with 61% of 2024 revenue coming from Supply Chain and Dedicated segments.
Negative Points
- Ryder System Inc (R) is experiencing a muted growth environment in 2025, reflecting ongoing freight market conditions.
- Rental demand remains weak, with rental utilization on the power fleet decreasing to 73% from 75% in the prior year.
- Used vehicle sales proceeds declined, with tractor proceeds down 13% and truck proceeds down 12% year-over-year.
- The company faces near-term revenue growth headwinds in its Supply Chain and Dedicated segments due to the freight cycle and economic uncertainty.
- Integration costs from acquisitions, such as Cardinal Logistics, have impacted the Dedicated segment's earnings before tax as a percent of operating revenue, which was below the long-term target.
Q & A Highlights
Q: Can you elaborate on the muted revenue growth guidance and the factors contributing to the 2% growth expectation?
A: Robert Sanchez, Chairman and CEO, explained that the company expects mid single-digit growth in Fleet Management Solutions (FMS) but anticipates flat lease fleet growth due to a soft freight market. This environment creates growth headwinds in supply chain and dedicated businesses. The earnings growth is primarily driven by initiative-based strategies that the company can control and execute, rather than relying on market conditions.
Q: What are the current dynamics in Fleet Management Solutions (FMS), and how do you see truck demand evolving?
A: Robert Sanchez noted that the market is not showing signs of an upturn yet, with rental moving seasonally but not significantly. Lease miles are flat, and used vehicle pricing is experiencing single-digit declines. Tom Havens, President of Global Fleet Management Solutions, added that customer sentiment remains cautious, with pipelines stable but decisions delayed due to economic uncertainty.
Q: How is the supply chain segment performing, and what are the expectations for 2025?
A: John Diez, COO and President, stated that supply chain operating revenue growth is expected to be below the segment's low double-digit target due to freight cycle and economic uncertainty. However, the segment's EBT percentage is expected to be within the high single-digit target range, driven by operational efficiencies in the omni-channel retail network.
Q: How are tariffs and US trade policy impacting Ryder's business, particularly in cross-border operations?
A: Robert Sanchez mentioned that the primary impact is creating uncertainty, which affects long-term contract signings. While 93% of Ryder's revenue is US-based, operations in Mexico and Canada face uncertainty regarding potential tariffs. Ryder is confident in passing through costs to customers and helping them navigate the need for resilience and flexibility.
Q: What is the outlook for dedicated transportation solutions, and how is the Cardinal acquisition integration progressing?
A: Robert Sanchez highlighted that the integration of Cardinal is progressing well and is expected to drive earnings growth in 2025. The dedicated segment's EBT as a percentage of revenue is anticipated to return to the high single-digit target range, supported by acquisition synergies and strong performance in the legacy business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
