RYDER SYSTEM INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 saw solid results despite challenging freight conditions, with comparable earnings per share of $12 and adjusted return on equity of 16%.
• Balanced growth strategy continues to drive outperformance, with integration of acquisitions like Cardinal Logistics and IFS on track.
• 2024 returned $456 million to shareholders via share repurchases and dividends, with share repurchases of 2.5 million shares and a 14% dividend increase.
• 2025 capital expenditure forecast is ~$2.7 billion, with lease spending expected to increase to $2.2 billion and rental spending forecast to decrease to $375 million.

Segment Performance

• Fleet Management Solutions (FMS): Fourth quarter operating revenue grew 3% due to higher ChoiceLease revenue, partially offset by lower rental demand. Pre-tax earnings were $152 million, up year over year. Full-year 2024 EBT as a percent of operating revenue was 10.1%.
• Supply Chain Solutions (SCS): Operating revenue increased 4% in the fourth quarter, driven by acquisitions, though offset by lower sales activity. Earnings increased 58% year over year. Full-year 2024 EBT as a percent of operating revenue was 8.4%.
• Dedicated Transportation Solutions (DTS): Operating revenue grew 46% in the fourth quarter due to the acquisition of Cardinal Logistics. EBT increased 10% year over year. Full-year 2024 EBT as a percent of operating revenue was 6.7%.

Guidance

• 2025 operating revenue expected to grow ~2% due to freight cycle headwinds.
• Comparable earnings per share expected to increase 17% to $13-$14 range, driven by contractual earnings growth.
• ROE expected to increase to 17%-18% range.
• Free cash flow expected to be between $300 million and $400 million, up from prior year due to lower vehicle CapEx and higher operating cash flow.

Risks

• Freight market conditions and economic uncertainty causing customer pause in signing long-term contracts.
• Uncertainty around tariffs and trade policy impacting sales and creating headwinds.
• Continued weak rental demand and used vehicle sales pricing declines.

Question and Answer

Q: Please parse out revenue growth guidance, specifically moving parts to 2% growth.

A: Robert Sanchez noted FMS expected mid-single digit growth, with muted freight market causing growth headwinds in supply chain and dedicated businesses, but initiatives-based earnings growth driving confidence.

Q: Discuss revenue growth in supply chain and dedicated, and which has bigger drag.

A: Robert Sanchez and John Diez noted secular trends for outsourcing are solid, but freight market slowdown and economic uncertainty hurting growth in these segments, with both seeing sideways market and waiting for sales activity to pick up later in the year.

Q: How is tariffs and US trade policy impacting business?

A: Robert Sanchez mentioned tariff uncertainty creating headwinds for customer contract signings, with 93% of revenues in US, but well-positioned to help customers navigate uncertainty.

Q: Impact of bonus depreciation change on Ryder System, Inc.?

A: Robert Sanchez stated a combination of bonus depreciation and interest deductibility could lower cash taxes by ~$200 million, depending on policy implementation timing.