Release Date: April 23, 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 the first quarter, in line with their forecast.
- The company has successfully shifted its revenue mix towards asset-light businesses, with 60% of 2025 revenue expected from Supply Chain and Dedicated Transportation Solutions.
- Ryder System Inc (R) increased its 2025 forecast for free cash flow to a range of $375 million to $475 million, primarily due to lower expected capital spending.
- The company returned $202 million to shareholders through share repurchases and dividends during the quarter.
- Ryder System Inc (R) expects to realize significant benefits from multiyear strategic initiatives, contributing to an expected annual pretax earnings benefit of approximately $150 million.
Negative Points
- Rental demand and used vehicle sales remain weak, impacting earnings in the Fleet Management Solutions segment.
- Year-over-year used tractor proceeds declined 16% and used truck proceeds declined 17%, reflecting weaker market conditions.
- The rental fleet utilization rate was 66%, below the company's long-term target of low teens over the cycle.
- The company faces near-term contractual sales headwinds due to economic uncertainty, causing some customers to delay decisions or downsize fleets.
- Ryder System Inc (R) revised its 2025 ROE forecast range to 16.5% to 17.5%, down from the previous range of 17% to 18%, reflecting a more muted macroeconomic environment.
Q & A Highlights
Q: Can you discuss the outlook for the used vehicle market and the factors influencing it?
A: Robert Sanchez, CEO, explained that the used vehicle market is performing as expected, with a sequential decline primarily due to selling aged inventory. Excluding this, tractor pricing is up, indicating stabilization. Tom Havens, President of Fleet Management Solutions, added that while inventory is up, it's manageable, particularly with a shift from tractors to trucks. The company targets a 150 basis point spread over WACC for lease pricing, maintaining this target consistently.
Q: How is Ryder positioned in the event of a recession, and what macro assumptions are in the low end of your guidance?
A: Robert Sanchez, CEO, stated that the outlook reflects a muted economic environment with lower rental demand. The low end of the range assumes further deterioration in transactional businesses. Despite this, Ryder expects year-over-year earnings growth, highlighting the resilience of its contractual business and ongoing strategic initiatives.
Q: What are the early indicators of demand and utilization trends in your business?
A: John Diez, CFO, noted that rental conditions were softer than anticipated, but there are signs of stabilization in the tractor class. Lease miles on tractors are up year-over-year, and used vehicle sales show sequential improvements in tractor pricing, indicating positive momentum in certain areas.
Q: Are there any M&A opportunities Ryder is considering in the current environment?
A: Robert Sanchez, CEO, mentioned that Ryder is actively looking for acquisitions that bring new capabilities or verticals, similar to the Cardinal Dedicated opportunity. The focus is on well-run companies with a compatible culture, although Ryder's long-term targets are not heavily dependent on acquisitions.
Q: How is Ryder's Supply Chain segment affected by tariffs and end-market risks?
A: Robert Sanchez, CEO, and an unidentified company representative explained that most of Ryder's auto work is with US assembly plants, showing stable activity. The omnichannel segment faces cross-currents, with some slowdown in shipments from China but acceleration from other countries. Overall, the Supply Chain segment is not significantly impacted by tariffs.
Q: What is the impact of the spread between new and used vehicle pricing on Ryder's business?
A: Robert Sanchez, CEO, indicated that the increase in new truck pricing supports used truck pricing. As used equipment inventory decreases, pricing is expected to improve. Ryder has already seen tractor pricing rise and has increased prices on sleeper tractors, suggesting a positive trend.
Q: How does Ryder plan to manage potential declines in residual values?
A: Cristina Gallo-Aquino, Principal Accounting Officer, stated that a 5% drop in pricing would reach the low end of residual estimates, but current trends are positive. Ryder's guidance accounts for potential downside, and historical data shows that such low levels have been rare and short-lived.
Q: What is Ryder's approach to the upcoming EPA standards and potential pre-buy activity?
A: Robert Sanchez, CEO, noted that Ryder has not factored in a pre-buy for this year. While a pre-buy could benefit used truck values in the long term, it is not included in Ryder's pricing or long-term targets. The impact on new vehicle costs is expected to be minimal, with any increases passed through to customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
