Ryder(R) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating revenue for the first quarter was $2.5 billion, up 6% from the prior year, primarily due to recent acquisitions and contractual growth, partially offset by lower rental revenue [105] - Comparable earnings per share from continuing operations were$ 2.14, down from $2.81 in the prior year, reflecting weaker market conditions in used vehicle sales and rental [106] - Return on equity was 17%, in line with the high-teens target over the cycle, with a year-over-year decline due to weakening used vehicle sales and rental market conditions [107] - Free cash flow for the first quarter decreased to$ 13 million from $101 million in 2023, primarily due to lower proceeds from property and used vehicle sales [107] Business Line Data and Key Metrics Changes - Fleet Management Solutions operating revenue decreased by 1% due to lower rental demand, partially offset by higher ChoiceLease revenue, which grew by 9% [108] - Dedicated operating revenue increased by 33%, reflecting the acquisition of Cardinal Logistics, although EBT declined due to acquisition integration and related costs [114] - Supply Chain operating revenue increased by 11%, driven by the IFS and Cardinal acquisitions, with earnings benefiting from stronger automotive performance [121] Market Data and Key Metrics Changes - Used vehicle sales results showed a decline, with used tractor proceeds down 34% and used truck proceeds down 30% compared to the prior year [112] - Rental utilization on the power fleet was 66%, down from 75% in the prior year, reflecting weak market conditions [110] - The average rental fleet is expected to be down 8% in 2024, with rental capital expenditures reduced by approximately$ 100 million [115] Company Strategy and Development Direction - The company continues to execute a balanced growth strategy, which has driven outperformance relative to prior cycles, with a focus on enhancing returns and integrating recent acquisitions [84][85] - The integration of Cardinal Logistics is on track, expected to generate significant cost savings and efficiencies, with net synergies projected between $40 million and$ 60 million [100][101] - The company remains committed to investing in organic growth and strategic acquisitions to drive long-term profitable growth [119] Management's Comments on Operating Environment and Future Outlook - Management expects 2024 to reflect trough market conditions in used vehicle sales and rental, with a gradual pickup anticipated in the second half of the year [130] - The company is confident in the long-term secular growth trends in its segments, despite current economic uncertainties causing some customers to delay decisions [130] - Management highlighted the importance of maintaining pricing discipline in the leasing market, despite some softness in demand [31] Other Important Information - The company plans to hold an Investor Day on June 13 in New York City, featuring presentations from business leaders and showcasing expanded supply chain capabilities [6] - The full year 2024 forecast for free cash flow is negative $175 million to$ 275 million, an improvement from prior forecasts due to lower rental capital expenditures [89] Q&A Session All Questions and Answers Question: Update on used truck rental market recovery - Management noted that the current downturn in rental and used trucks is the longest in a long time, with expectations of nearing the end of this cycle, and some stabilization in used truck pricing is beginning to show [11][12][14] Question: Recovery in used vehicle pricing - Management indicated that they are not assuming a recovery in used vehicle pricing for the balance of the year, expecting to hit the bottom in the second and third quarters, with a potential uptick in the fourth quarter [18][19] Question: Trends in Dedicated and Supply Chain backlogs - Management reported that the Dedicated pipeline has seen a pop year-over-year, but there are delays in decision-making in the Supply Chain segment due to economic uncertainty [46][47] Question: Benefits from anticipated pre-buy activity - Management expects benefits across leasing fleet growth, rental, and used pricing gains from the anticipated pre-buy activity ahead of the 2027 EPA engine technology changes [51][52] Question: Comments on end markets and trends in SCS - Management highlighted continued volume in the automotive sector and industrial, with expectations for improvement in e-commerce omnichannel demand in the second half of the year [60][62]