R Q1 Earnings Call: Ryder Lowers Full-Year Guidance Amid Muted Rental Demand, Highlights Contracted Business Resilience

Commercial rental vehicle and delivery company Ryder (NYSE: R) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 1.1% year on year to $3.13 billion. Its non-GAAP profit of $2.46 per share was 2.8% above analysts’ consensus estimates.

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StockStory’s Take

Ryder’s first quarter results were shaped by a mix of continued earnings growth in its contractual lease, supply chain, and dedicated segments, offset by weaker performance in its rental and used vehicle sales businesses. Management pointed to operational execution within its asset-light supply chain and dedicated segments as a key driver, referencing ongoing strategic initiatives and cost discipline. CEO Robert Sanchez remarked, “Earnings growth in our contractual businesses reflects the value proposition and pricing discipline embedded in our high-quality contractual portfolio.”

Looking ahead, Ryder’s leadership lowered its full-year adjusted EPS outlook, citing expectations for a more muted macroeconomic environment and softness in rental demand. Sanchez took a cautious tone, stating that the updated guidance range assumes both persistent market uncertainty and the potential for further deterioration in transactional businesses. He emphasized, however, that the company’s transformed model is “less dependent on the transactional rental and used truck market to hit our earnings numbers,” highlighting the stability of its contractual revenue streams.

Key Insights from Management’s Remarks

Ryder’s management focused on the impact of its business transformation, with particular emphasis on the shift toward contractual revenue and ongoing strategic cost initiatives. The quarter’s performance was influenced by several operational and market factors:

• Contractual business momentum: Growth in lease, supply chain, and dedicated segments was driven by ongoing pricing discipline and operational improvements, contributing to higher earnings despite a weaker rental environment.
• Rental and used vehicle headwinds: Lower rental demand and declining used vehicle sales proceeds were cited as key drags on results. Management acknowledged that rental conditions remain soft and that used vehicle prices, while down sequentially, are showing signs of stabilization, particularly for sleeper tractors.
• Inventory management adjustments: The company continued to work through elevated used vehicle inventory, shifting sales from aged tractors to trucks. Management noted that tractor inventory is now at more manageable levels, while truck inventory remains elevated but historically has been absorbed by the market.
• Strategic initiatives progressing: Ryder is on track with multiyear initiatives aimed at lease pricing, maintenance cost savings, and acquisition synergies in its dedicated business. These efforts are expected to deliver incremental pre-tax earnings benefits in 2025, independent of broader economic cycles.
• Capital deployment flexibility: With improved free cash flow and a deleveraged balance sheet, Ryder highlighted an increased capacity for both organic investment and targeted M&A, while maintaining ongoing share repurchases and dividends. Management indicated they remain opportunistic in seeking acquisitions that add vertical capabilities or geographic reach, while clarifying that major acquisitions are not essential for achieving their long-term earnings and return targets.

Drivers of Future Performance

Management’s outlook for the coming quarters centers on maintaining contractual revenue growth, offsetting challenges in the more cyclical rental and used vehicle markets. The updated guidance reflects persistent external headwinds, but also confidence in the company’s ability to execute on its strategic priorities.

• Continued softness in rental: Ryder expects ongoing muted demand in its rental segment, which will weigh on revenue growth and operating margins in the near term.
• Earnings from strategic initiatives: The company anticipates that benefits from lease pricing, maintenance optimization, and acquisition synergies will help sustain earnings growth, even amid a sluggish freight market.
• Acquisition and macro risks: Management flagged the potential for further macroeconomic deterioration and noted that successful execution of M&A and ongoing cost initiatives will be necessary to achieve targeted returns. They also acknowledged that prolonged weakness in used vehicle pricing could pose downside risk.

Top Analyst Questions

• Jordan Alliger (Goldman Sachs): Asked about the trajectory of used vehicle pricing and the mechanics of lease pricing; management explained that used tractor pricing is stabilizing, with aged inventory sales winding down, and clarified that lease contracts target a spread of 100-150 basis points above cost of capital.
• Christyne McGarvey (Morgan Stanley): Inquired about the resilience of earnings in a potential recession; CEO Sanchez emphasized that Ryder’s contractual businesses are less volatile and can still deliver earnings growth even in muted conditions.
• Jeff Kauffman (Vertical Research Partners): Questioned early demand indicators and capital allocation; President John Diez highlighted softness in rental utilization but noted some positive signs in tractor demand, while CEO Sanchez reiterated that M&A remains opportunistic but not essential for long-term targets.
• Scott Group (Wolfe Research): Sought clarity on supply chain exposure to tariffs and auto sector risks; management reported minimal impact due to US-centric operations and diversified customer base, with omnichannel retail being the most affected by global sourcing shifts.
• Brian Ossenbeck (JPMorgan): Probed the risk of further declines in used vehicle residuals; CFO Christyne McGarvey indicated that current forecasts can absorb up to a 5% price drop before reaching the lower end of residual value estimates, and that continued monitoring is in place.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will monitor (1) Ryder’s progress in reducing elevated used vehicle inventories and stabilizing pricing, (2) the realization of earnings benefits from strategic initiatives in lease pricing and cost optimization, and (3) capital allocation decisions involving M&A or further share repurchases. Continued execution on contractual revenue growth and resilience in dedicated and supply chain segments will also be important indicators of Ryder’s ability to navigate a challenging freight environment.

Ryder currently trades at a forward P/E ratio of 10.8×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our free research report.

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