Ryder(US:R)2022-02-16 21:33Financial Data and Key Metrics Changes - Operating revenue for Q4 2021 was $2.1 billion, a 14% increase from the prior year, with comparable earnings per share from continuing operations at $3.52 compared to $0.83 in the prior year [16][17] - Return on equity reached a record 20.9% for 2021, reflecting improved performance in Fleet Management Solutions (FMS) [17][18] - Free cash flow for 2021 was strong at $1.1 billion, although down from the prior year due to higher capital expenditures [13][40] Business Line Data and Key Metrics Changes - FMS operating revenue increased by 9%, driven by a 35% increase in rental revenue, with pre-tax earnings of $255 million, up by $195 million from the prior year [18][19] - Supply Chain Solutions (SCS) operating revenue increased by 21%, with EBT as a percentage of operating revenue at 3.5%, below target due to supply chain disruptions [23] - Dedicated Transportation Solutions (DTS) operating revenue increased by 26%, with EBT as a percentage of operating revenue at 4%, below target due to increased labor and insurance costs [24] Market Data and Key Metrics Changes - The used vehicle market conditions remained robust, with year-over-year proceeds approximately doubling for both tractors and trucks, and average used vehicle pricing well above residual value estimates [21][22] - The company expects robust outsourcing trends to continue, supported by increased awareness of supply chain resiliency [26] Company Strategy and Development Direction - The company completed two acquisitions in January 2022, expected to add approximately $480 million and $135 million to supply chain total revenue, respectively [9][10] - The company plans to enter a new $300 million accelerated share repurchase program, while still expecting capacity for acquisitions [14] - Long-term ROE target is raised from 15% to a range of upper-teens, reflecting higher expected returns in FMS [51] Management's Comments on Operating Environment and Future Outlook - Management noted unprecedented challenges impacting labor, supply chain, and truck production, which are providing growth opportunities [11] - The company expects operating revenue to grow approximately 10% in 2022, with comparable EPS forecasted between $11 and $12, up 15% to 25% over the prior year [27][43] - Management anticipates continued strength in FMS and a recovery of SCS and DTS returns in the second half of 2022 [40] Other Important Information - The company plans to exit the lower return FMS business in the UK over the next 12 to 18 months, which is expected to benefit cash flow [48] - The company is maintaining balance sheet flexibility through moderate lease growth, enabling investments in higher return opportunities [50] Q&A Session Summary Question: Customer acceptance of price increases in FMS segment - Management noted strong customer acceptance of pricing increases due to lower residual expectations and ongoing volatility in the market [60][61] Question: Drivers for EBT margin recovery in Dedicated and Supply Chain - Management highlighted record new contract wins and recovery of pricing related to wage increases as key drivers for margin recovery [71][72] Question: Impact of Omicron on operations - Management acknowledged increased absenteeism due to Omicron but noted strong demand in FMS helped offset the impact [103][104] Question: Expectations for inflation across different segments - Management indicated that CPI increases are included in contracts, allowing for cost pass-throughs to customers, thus mitigating inflation impacts [115][117] Question: Initial performance and strategy for acquisitions - Management expressed excitement about the Whiplash and Midwest acquisitions, emphasizing their strategic importance in expanding e-commerce fulfillment and multi-client warehousing capabilities [128][129]