Ryder(R) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating revenue for Q1 2025 was $2.6 billion, up 2% from the prior year, primarily due to acquisition and contractual revenue growth in supply chain and Fleet Management Solutions (FMS) [18] - Comparable earnings per share (EPS) from continuing operations increased to$ 2.46, up from $2.14 in the prior year [18] - Return on equity (ROE) was reported at 17%, consistent with expectations [19] - Free cash flow rose to$ 259 million from $13 million in the prior year, reflecting lower capital expenditures [19] Business Line Data and Key Metrics Changes - Fleet Management Solutions' operating revenue increased by 1%, driven by higher ChoiceLease revenue, which grew by 3% [20] - Supply Chain operating revenue increased by 3%, with earnings up 35% year-over-year due to improved performance from strategic initiatives [27] - Dedicated operating revenue rose by 8%, with earnings before tax (EBT) increasing by 50% year-over-year, benefiting from acquisition synergies [28] Market Data and Key Metrics Changes - 93% of Ryder's revenue is generated in the U.S., with expectations for 60% of 2025 revenue to come from asset-light businesses [15] - Used vehicle sales saw a decline, with used tractor proceeds down 16% and used truck proceeds down 17% year-over-year [23] - Rental utilization on the power fleet was 66%, consistent with the prior year, but rental demand remains weak [22] Company Strategy and Development Direction - The company is focused on a balanced growth strategy, aiming to derisk the business and increase the return profile while accelerating growth in asset-light businesses [7][12] - Ryder expects to generate annual pretax earnings benefits of approximately$ 150 million from multiyear strategic initiatives, which are not dependent on a cycle upturn [43] - The company plans to continue investing in organic growth and strategic acquisitions, having repurchased approximately 20% of its shares since 2021 [37] Management's Comments on Operating Environment and Future Outlook - Management noted a more muted macroeconomic environment impacting rental demand and used vehicle sales, but remains confident in long-term growth trends [39][41] - The company anticipates that the extended freight downturn will lead to some customers delaying decisions or downsizing fleets [41] - Despite current challenges, management highlighted the resilience of the contractual business model, which continues to provide earnings growth [75] Other Important Information - Ryder returned $202 million to shareholders through share repurchases and dividends during the quarter [13] - The company expects to generate approximately$ 10 billion from operating cash flow and used vehicle sales proceeds over the next three years, creating $3.5 billion of incremental debt capacity [35] Q&A Session Summary Question: Can you talk about the used vehicle market and its potential developments? - Management indicated that used vehicle pricing is expected to stabilize as aged inventory is sold off, with a potential increase in retail pricing in the second half of the year [56][58] Question: What macro assumptions are in the low end of the guidance? - The low end of the guidance assumes further deterioration in rental and used vehicle sales, but management remains confident in earnings growth year-over-year [73][75] Question: What indicators are being monitored for early demand cycles? - Rental fleet utilization is a key indicator, with softer conditions noted as the company exited Q1, but some positive momentum in tractor classes was observed [83][86] Question: What are the implications of a potential decline in used vehicle pricing? - If pricing were to decline significantly, it would lead to incremental charges on used trucks, but the current guidance accounts for potential downside risks [126][128] Question: How is the company positioned regarding potential M&A opportunities? - Management is actively looking for acquisition opportunities that align with Ryder's capabilities and culture, particularly in supply chain solutions [89][92]