Ryder(R) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported operating revenue of $2.6 billion in the second quarter, up 2% from the prior year, primarily due to contractual revenue growth in Supply Chain Solutions (SCS) and Fleet Management Solutions (FMS) [14] - Comparable earnings per share from continuing operations were $3.32, an 11% increase from $3 in the prior year, reflecting higher contractual earnings and share repurchases [14] - Return on equity (ROE) was 17%, up from the prior year, primarily due to higher contractual earnings [15] - Year-to-date free cash flow increased to $461 million from $71 million in the prior year, reflecting lower working capital needs and reduced capital expenditures [15] Business Line Data and Key Metrics Changes - Fleet Management Solutions (FMS): Operating revenue increased by 1%, driven by ChoiceLease revenue, which was up 2%. However, pretax earnings in fleet management were $126 million, down year-over-year due to weaker freight market conditions [16] - Supply Chain Solutions (SCS): Operating revenue increased by 3%, driven by new business and higher customer volumes and pricing. Earnings increased by 16% from the prior year, reflecting operating revenue growth and improved performance from initiatives [21] - Dedicated Transportation Solutions (DTS): Operating revenue decreased by 3% due to lower fleet count, but EBT increased by 1% year-over-year, reflecting acquisition synergies [22] Market Data and Key Metrics Changes - The company expects its transformed business model to continue outperforming prior cycles, with 60% of 2025 revenue expected to come from asset-light businesses compared to 44% in 2018 [12] - Used vehicle sales results were negatively impacted by increased wholesale volumes to manage aged inventory, with used tractor and truck pricing both declining 17% year-over-year [18] Company Strategy and Development Direction - The company is focused on executing its balanced growth strategy, which includes organic growth, strategic acquisitions, and innovative technology [12] - The company announced a 12% annualized increase to its quarterly dividend, reflecting higher profitability and improved returns over the cycle [10] - The company aims to leverage the momentum of its transformed business model to support profitable growth and return capital to shareholders [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current freight downturn and highlighted strong sales and pipeline activity in SCS [30] - The company revised its full-year 2025 comparable EPS forecast to a range of $12.85 to $13.30, reflecting higher contractual earnings and benefits from strategic initiatives [30] - Management noted that while sales pipelines remain strong, prolonged freight downturn and economic uncertainty continue to cause some customers to delay decisions [30] Other Important Information - The company expects to generate approximately $3.5 billion of incremental debt capacity over the next three years, resulting in $14 billion available for capital deployment [28] - The company has repurchased approximately 21% of its shares outstanding since 2021 and increased the quarterly dividend by 57% [10] Q&A Session Summary Question: Confidence in deploying dry powder on the balance sheet - Management feels confident about deploying capital for share repurchase programs and acquisitions, indicating a balanced approach to capital allocation [41][42] Question: Used vehicle pricing expectations - Management expects tractor pricing to continue to increase, with a steady upward trend anticipated, especially in the fourth quarter [44][45] Question: Losses on sales in Q2 and expectations for Q3 - Losses were driven by incremental wholesaling activity of aged inventory, with expectations for a return to gains in Q3 as wholesaling activity decreases [48][49] Question: OEM delays and CapEx changes - Management anticipates that OEM delays will reverse in 2026, with increased capital spending expected as the freight market stabilizes [66][67] Question: Maintenance growth outlook - Management is focusing on mobile maintenance initiatives and sees potential for growth in retail maintenance services, despite traditional maintenance offerings being stagnant [100][103]