Ryder System’s fourth quarter results showed the continued success of its Supply Chain Solutions (SCS) segment in driving revenue and profitability growth, while its Fleet Management Solutions (FMS) division struggled due to lower used vehicle sales. CEO Robert Sanchez, who has been leading the company’s efforts to transition away from FMS, noted that despite challenges in the freight market, Ryder’s strategic actions have improved the business model’s resilience.
SCS, which provides contract logistics services, and Dedicated Transportation Solutions (DTS) saw significant growth, especially with the recent acquisition of Cardinal Logistics. In the fourth quarter of 2023, SCS operating revenue accounted for 76% of FMS revenue, up from 70.5% the year before. While FMS profitability declined, SCS saw improvements in earnings before taxes.
The decline in used vehicle sales, particularly in the tractor market, impacted FMS performance. However, Ryder’s focus on expanding its SCS and DTS divisions has positioned the company for long-term growth. The earnings per share from continuing operations for the quarter and the full year were impacted by market conditions in used vehicle sales and rental, but showed some improvement in SCS results.
Wall Street’s reaction to Ryder’s earnings was mixed, with the stock declining after the results were announced. The company’s guidance for 2024 suggests minimal earnings improvement, with an expected increase in operating revenue driven by the Cardinal Logistics acquisition.
Sanchez highlighted the benefits of integrating Cardinal into Ryder’s operations, emphasizing the potential for scale and efficiency within the dedicated transportation network. He emphasized the company’s shift towards asset-light businesses like SCS and DTS, which have become key drivers of revenue growth.
As Ryder continues to navigate market challenges, Sanchez expressed confidence in the company’s transformation and its focus on sustainable, long-term growth. The acquisition of Cardinal and the strategic shift towards SCS and DTS are expected to drive earnings growth in the coming years.
