Ryder System is on track to wrap up 2024 as a company that has undergone a significant transformation over the past six years. Known primarily for its truck rental services, Ryder is now shifting towards a transportation model that is increasingly focused on contractual business. This evolution has been emphasized by Ryder management in various presentations over the years, and was further highlighted in the company’s third quarter earnings report and analyst call.
A comparison chart presented during the call showcased the shift in Ryder’s revenue streams. Six years ago, the majority of the company’s revenue came from its Fleet Management Services (FMS) division, which primarily focused on truck rentals. Today, Ryder’s revenue is expected to be more evenly split between its FMS division and its Supply Chain Solutions (SCS) and Dedicated Transport Solutions (DTS) segments, which cater to contract logistics and dedicated transportation services for customers.
Ryder’s CEO, Robert Sanchez, pointed out the benefits of this shift to more contractual revenue, noting that it leads to more predictable earnings and revenue streams. Despite a slight dip in non-GAAP earnings per share compared to the prior year, Ryder reported an increase in revenue, driven by acquisitions in the DTS and SCS segments.
The company also saw a significant rise in free cash flow and maintained a solid return on equity. Sanchez highlighted the strength of Ryder’s contractual portfolio and its potential to fuel profitable growth and returns for shareholders. Looking ahead, Ryder anticipates improved net income in the fourth quarter compared to the same period in 2022.
However, challenges persist in the form of declining sales and prices for used vehicles, which impact Ryder’s bottom line. The company’s FMS division saw a decrease in vehicle sales, with prices varying across different vehicle types. Inventory levels remained elevated, prompting efforts to manage renewals and sales effectively.
Despite a positive earnings call, Ryder’s stock faced a bearish response from the market, reflecting concerns over the company’s outlook. Looking ahead, Ryder revised its full-year earnings per share forecast slightly downward. The company’s ongoing transformation reflects its commitment to adapting to changing market dynamics and evolving customer needs.
