Ryder’s quarterly earnings showed signs of the weak truck market, but its emphasis on other segments of the company besides its flagship fleet rental activities continued to bear fruit.
The bottom line is that Ryder’s non-GAAP earnings per share of $2.14 exceeded consensus expectations by 43 cents, according to SeekingAlpha. Its revenue of $3.1 billion exceeded consensus by $40 million. However, the $2.14 EPS came in 67 cents lower than the corresponding figure of 2023’s first quarter.
Investors cheered the numbers. At about 12:25 p.m., Ryder (NYSE: R) stock was up $11.79, an increase of 10.8%, to $120.79. The 52-week high on the stock is $121.58.
The Ryder quarterly data reflected the enormous swings that the used truck market has gone through since the post-pandemic trucking bull market and the long period of weakness that is now measured as at least two years and counting.
Average prices Ryder received for a used tractor fell 34% from the first quarter of 2023 through the first quarter of 2024. That followed a similar decline between Q1 ’22 and Q1 ’23, when used tractor prices declined 35%. But between the first quarter of 2021 and 2022, average used tractor prices received by Ryder rose 146%. (Ryder does not release an average sales price.)
Even with that decline in the first quarter compared to a year earlier, CEO Robert Sanchez said on the company’s earnings call with analysts that the prices received in the quarter had exceeded expectations. He also said used truck prices had declined sequentially about 3% to 4% from the fourth quarter of 2023 through this year’s first quarter.
Used truck sales at Ryder, which encompasses a wide range of vehicles other than Class 8 tractors, declined 30% between Q1 ’23 and Q1 ‘24. The decline in the 12 months prior to that was 16%.
Fleet Management Solutions (FMS) at Ryder saw its operating revenue, which is net of fuel, decline 1% to $1.251 billion. (Revenue including fuel was down 3%.) Earnings before taxes (EBT) in the segment declined 45%, to $100 million. EBT as a percentage of operating revenue fell 640 basis points from the first quarter of 2023 to 8% from 14.4%.
On the earnings call, Sanchez said Ryder expects a “modest” recovery in the rental market in the second half of the year. “Obviously demand hasn’t come back the way we’d like,” he said. “The market currently has an oversupply of trucks for rent.”
Sanchez added that the rental industry “has done a pretty good job over time to rightsize these fleets.” Given the depth of the current market weakness, “this one may take a little bit longer” to get balanced. That fact is in what Sanchez called the “calculus” of how the company will perform the rest of the year.
Good numbers at SCS and DTS
While total revenue and operating revenue were falling at FMS, it was rising in other parts of Ryder, which management has said repeatedly is part of the company’s long-term plan. In the give and take at Ryder to reduce the overall percentage of revenue attributable to FMS, Supply Chain Solutions and Dedicated Transport Services together had revenue of $1.865 billion. FMS, including fuel revenue, was at $1.455 billion. Sanchez said he expects the SCS/DTD share of revenue to be 60% this year.
SCS, a provider of third-party logistics, saw its operating revenue (which doesn’t include fuel as well as subcontracted transportation) rise 11%, to $972 million. Earnings before taxes soared 267%, to $64 million, and EBT as a percent of operating revenue rose 470 bps to 6.6%.
Ryder noted in its earnings statement that the 2023 figure was negatively impacted by a $30 million asset impairment charge. But it also said it “benefited from stronger automotive performance and recent acquisitions.” In recent years, Ryder has acquired several companies that it folded into SCS, including Baton, Whiplash and Midwest Warehouse & Distribution System.
Cardinal Logistics working its way into the company
The figures on the performance of DTS in part showed the impact of the acquisition of Cardinal Logistics, which was folded into DTS after it was acquired Feb. 1. Operating revenue rose 33% to $427 million. But EBT as a percent of operating revenue declined 480 bps to 4.2%.
Ryder’s prepared earnings statement said acquisition costs related to the Cardinal purchase impacted that measurement. But Sanchez on the earnings call said he expects EBT to rise back to the high-single-digit range once the Cardinal integration is complete. Ultimately, it will add about $800 million in operating revenue to DTS.
Ryder released a slightly revised forecast for 2024. In releasing its fourth-quarter earnings, it said it expected its non-GAAP earnings per share would be $11.50-$12.50 in 2024. That figure was revised upward to $11.75-$12.50.
For all of 2023, non-GAAP EPS was $12.95.
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