Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ryder System Inc (R, Financial) reported a 9% increase in operating revenue for the third quarter, driven by recent acquisitions.
- The company's contractual businesses, including Fleet Management Solutions, Dedicated, and Supply Chain, showed double-digit percentage growth.
- Ryder System Inc (R) has a strong balance sheet with leverage below the target range, providing ample capacity for capital allocation priorities.
- The company has a new $2 million share repurchase program, reflecting confidence in its financial position.
- Ryder System Inc (R) expects to generate approximately $10 billion from operating cash flow and used vehicle sales proceeds between 2024 and 2026, creating significant capital deployment capacity.
Negative Points
- The company experienced a decline in comparable earnings per share from continuing operations, reflecting weaker market conditions in used vehicle sales and rental.
- Rental utilization on the power fleet was 71%, down from 75% in the prior year, indicating ongoing weakness in the freight environment.
- Used vehicle sales proceeds declined significantly, with tractor proceeds down 22% and truck proceeds down 19% year-over-year.
- The extended freight downturn and economic uncertainty have caused some customers to delay decisions and downsize their fleets.
- Ryder System Inc (R) faces competitive pressure in the lease market, particularly from redeployable assets, which can impact pricing.
Q & A Highlights
Q: Can you discuss your lease renewal experience given the ongoing freight slowness and how private fleet trends might impact leasing?
A: Robert E Sanchez, CEO: We expect to complete the full benefit of the lease repricing initiative by 2025. Currently, private fleets are not growing as much, reflecting a right-sizing of fleets. Long-term, as private fleets grow, we should see benefits. Tom Havens added that renewals are seeing some downsizing, but Ryder's value proposition remains strong, especially in a high inflation environment.
Q: Is there any indication that rental demand is bottoming, and could there be a recovery in 2025?
A: Robert E Sanchez, CEO: We are seeing seasonal pickup in rental demand, but no signs of a broader market recovery yet. The freight market downturn is in its ninth quarter, so we are closer to the end than the beginning. An upturn is expected in 2025, but it's not yet reflected in our models.
Q: What are the expectations for Q4 seasonality and its impact on earnings?
A: John J Diez, CFO: We expect normal seasonal uptick in demand due to holidays, but no signs of recovery beyond that. The fourth quarter forecast assumes typical seasonal trends without significant improvement in market conditions.
Q: Can you explain the decline in SelectCare vehicles and the strategy for the rental fleet given low utilization?
A: Tom Havens: SelectCare margins are up despite a decline in low-revenue units. For the rental fleet, we have reduced it significantly and are maintaining it to prepare for an upturn, allowing us to leverage earnings when demand returns.
Q: What are the expectations for earnings growth in 2025, considering current market conditions?
A: Robert E Sanchez, CEO: We expect earnings growth from contractual businesses due to initiatives like lease pricing and cost savings. Transactional businesses could see growth depending on the timing and magnitude of a freight cycle recovery. Despite current conditions, Ryder is positioned for growth as the market improves.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
