Ryder’s stock climbed sharply on the release of its earnings. (Photo: Jim Allen\FreightWaves)
(This article has been updated following the change in direction of Ryder stock Wednesday and its earnings call with anaylsts).
Investors greeted Ryder’s earnings report with a significant move upward in its price, though few numbers released by the company were particularly bullish.
At approximately 10 a.m. Wednesday, Ryder stock (NYSE: R) was up just under 6% to $146.20. At that time, the S&P 500 for the day was up about 3%.
But Ryder’s stock couldn’t hold those gains. At approximately 1 p.m., it was down $2.86, a drop of 2.07%, to $135.12. At that point, the S&P 500 was up about 2.2%. Ryder’s stock price before Wednesday’s increase was down more than 16% in the past three months. However, it is positive for the year, up about 13%.
The improvements at Ryder year on year were modest. But they came over a 12-month period in trucking and logistics generally described as one of the most challenging on record.
The bottom line at Ryder is that non-GAAP earnings rose to $106 million from $96 million a year ago. That resulted in an increase in earnings per share to $2.46 for the quarter from $2.14 a year ago.
The surge in the stock price also comes after the earnings report saw Ryder cut its outlook for 2025, just three months after it released its first projections for the year.
The company’s outlook “assumes a more muted economic environment primarily impacting demand for our transactional rental business,” Ryder CFO Cristina Gallo-Aquino said in the earnings release. But the company expects to generate more free cash flow because it will slow capital spending, she added.
Total revenue and operating revenue growth is now seen rising approximately 1%. The company expects non-GAAP earnings per share of $12.85-$13.60.
The comparable figures released in February were revenue growth of about 2% and non-GAAP EPS of $13-$14 per share.
The second-quarter estimate is now $3-$3.25. That actually is higher than the earlier estimate of $2.30 to $2.55.
Used vehicle sales were a major focus of the earnings call with analysts.
The drops in average sales price of used vehicles, which is part of the Fleet Management Solutions (FMS) results, were 16% for tractors and 17% for trucks compared to a year ago. But there also was a price decline sequentially from the fourth quarter of 8% for trucks and 7% for tractors.
Used vehicles in inventory rose sequentially, as did the number of vehicles sold. Ryder had 9,500 vehicles in inventory at the end of the quarter, up from 9,000 in the fourth quarter and 8,900 a year ago. Sales climbed sequentially from the fourth quarter to 5,100 from 4,700 but were 6,500 a year ago.
On the earnings call with analysts, Gallo-Aquino said sales prices for tractors improved sequentially over the course of the quarter.
She also said the 9,500 vehicles in inventory exceeded the company’s targets. But residual values for trucks taken earlier on the company’s earnings are less than the current values the company has booked in its earnings. (At the start of COVID, Ryder significantly reduced the residual values of its fleet.)
COO John Diez said the end-year rental fleet at Ryder is expected to be down 9% from the prior year, and the average fleet over the course of the year and the average fleet will be down approximately 4%.
CEO Robert Sanchez said on the call that the sale of tractors “is really the area that I think we’re most closely watching.”
Citing reductions in projected production of new Class 8 trucks, Sanchez said that should benefit the sale of used tractors, “and therefore gives us a chance to finish working through the inventories that are out there.”
Tom Havens, the president of FMS, said on the call that Ryder has been selling a large number of used vehicles through wholesaling. “But when you get to the second half of the year, we don’t expect that to continue,” Havens said. Sanchez had said earlier in the call that retail sales of used tractors was going to be more the avenue for equipment disposal, and Havens added that policy “will kind of naturally increase the price per unit going forward.”
“When you strip all that out and just look at the underlying trends, the price in retail is flattish,” he added.
Havens also said while the total inventory at Ryder is higher, tractor inventory at the company is down and the growth is in trucks.
“We like that better,” he said. “Tractor inventory is historically more difficult to work through, and we feel that the tractor inventory now is in line and very manageable.”
Tractors also were a focus when Diez responded to an analyst’s question of what Ryder thinks is the “canary in the coal mine” signaling positive or negative conditions ahead. He returned to the theme of tractor rentals and sales.
While Ryder may have trimmed its outlook, Diez said, the company has seen some “early signs” of a rebound in that tractor market, “with capacity coming out and stabilization around over the road tractor activity.”
“I would say on the sleeper and tractor classes, especially the sleeper class, we’re seeing some positive momentum there, which we hadn’t seen for some time,” Diez said
As for the actual financial numbers at Ryder,revenue was up just 1% overall. The core Ryder business, FMS, posted a 1% decline in revenue. Its logistics management arm, Supply Chain Solutions (SCS), had a 2% increase in revenue. The Dedicated Transportation Solutions (DTS) segment, bigger than a year ago because of the acquisition of Cardinal Logistics, had a 7% increase in revenue.
Earnings before taxes at FMS were down 6% from a year earlier, to $94 million from $100 million. The drop in total revenue reflected lower fuel costs passed on to customers, but operating revenue was up 1%. Ryder said in its prepared statement that the outcome in operating performance was a mixture of positive developments – better outcomes in its ChoiceLease plan, “driven by pricing and maintenance cost initiatives” – and negative, such as “weaker rental demand and lower used vehicle gains.”
Operating revenue at SCS was $1 billion, up 3% from a year ago. Earnings before taxes were up a strong 35%, to $86 million. But the jump wasn’t all due to higher revenue; earnings before taxes as a percent of operating revenue (which excludes fuel and purchased transportation) rose to 8.7% from 6.6%.
Margins were better also at DTS. Earnings before taxes as a percent of operating revenue rose to 5.9% from 4.2%. But the growth wasn’t all because of Cardinal; Ryder said that “results continue to benefit from strong performance of legacy business.”
