Q1 2025 Ryder System Inc Earnings Call
Please stand by.
Speaker Change: Good morning and welcome to the Ryder System First Quarter 2025 earnings release conference call. All lines are in lesson only mode until after the presentation.
Speaker Change: Today's call is being recorded. If you have any objections, please disconnect at this time. I would not like to introduce Ms. Kayleen Candela, Vice President and Vestor Relations for Ryder, Ms. Candela, you may begin.
Speaker Change: These statements are based on management's current expectations and are subject to uncertainty and changes in the circumstances.
Speaker Change: Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political, and regulatory factors [inaudible]
Speaker Change: More detailed information about these factors and a reconciliation of each non-GAAP financial measure to the nearest gap measure is contained in this morning's earnings release, earnings call presentation, and in Ryder's filings with the Securities and Exchange Commission, which are available on Ryder's website.
Robert Sanchez: Presenting on today's call are Robert Sanchez, Chairman and Chief Executive Officer, John Diez, President and Chief Operating Officer, and Christy Gallo Aquino, Executive Vice President and Chief Financial Officer.
Robert Sanchez: Additionally, Tom Havens, President of Fleet Management Solutions, and Steve Sensing, President of Supply Chain Solutions and Dedicated Transportation Solutions are on the call today and available for questions following the presentation. At this time, I'll turn the call over to Robert.
Good morning, everyone, and thanks for joining us.
Robert Sanchez: I'm proud of our team for delivering double-digit earnings growth during the first quarter, in line with our forecast for the first quarter of the forecast.
The business continues to outperform prior cycles.
Robert Sanchez: driven by our high quality contractual portfolio and reflecting the actions we've taken under our balanced growth strategy to de-risk the business, increase the return profile, and accelerate growth in our asset-like SCS and DTS businesses.
Robert Sanchez: I'll begin today's call by providing you with a strategic update
Robert Sanchez: Christy, we'll then take you through our first quarter results and John will review capital expenditures and our increasing capital deployment capacity and we'll see you in the next one.
Robert Sanchez: I'll then review our updated outlook for 2025 and discuss how we expect to leverage the momentum of our transformed business model. Let's begin on slide 4.
Robert Sanchez: Turning to slide 4, our Transform Business Model and Execution of our Balance Growth Strategy Continued at Drivering's Growth
Robert Sanchez: We remain on track to realize the benefits from our strategic initiatives outline during our February Ernie's call
Robert Sanchez: These benefits are the key driver of the year-over-year earnings growth we are expecting [inaudible]
Robert Sanchez: Long-term secular trends at favorite transportation and logistics outsourcing remain strong. The value that our solutions bring to our customers remains compelling, even more so during times of increasing complexity.
Robert Sanchez: By leveraging our operational expertise and innovative technology, we are well positioned to support our customers and prospects as they navigate changes to their supply chains and transportation networks.
Robert Sanchez: We generated ROE of 17% for the Trailing 12-month period, which is in line with our expectations for an extended freight cycle downturn and continues to demonstrate the resilience of our transform business model.
Robert Sanchez: Earnings growth in our contractual businesses reflect the value proposition and pricing discipline embedded in our high quality contractual portfolio. We expect our transforms and cycle tested business model to continue to outperform prior cycles.
Robert Sanchez: In addition to increasing the return profile of our business, the earnings power of our contractual portfolio continues to provide us with increased capital deployment capacity which we expect to use to support profitable growth and return capital to shareholders.
Robert Sanchez: During the quarter, we return $202 million to shareholders by repurchasing 1.1 million shares and paying our quarterly dividend.
Robert Sanchez: Since 2021, we have repurchased approximately 20% of our shares outstanding and increased our dividend approximately 40%
Robert Sanchez: We increased our 2025 forecast for free cash flow to a range of 375-475 million, primarily due to lower expected capital spending We increased our 2020 forecast for free cash flow to a range of 375-475 million, primarily due to lower expected capital spending
Robert Sanchez: Slide 5 illustrates how key financial and operating metrics have improved since 2018, reflecting the execution of our strategy.
Robert Sanchez: In 2018, prior to the implementation of our balance growth strategy, the majority of our $8.4 billion of revenue was from FMS FMS.
Robert Sanchez: Ryder generated comparable earnings per share of $5.95 and an ROE of 13%.
Robert Sanchez: Operating Casplo was 1.7 billion. This was during peak freight cycle conditions.
Now let's look at what we're expecting from Rider today.
Robert Sanchez: In 2025, a year in which freight market conditions are expected to remain near trough levels are transformed business models expected to generate meaningfully higher earnings and returns than it did during the 2018 peak.
Robert Sanchez: To organic growth, strategic acquisitions and innovative technology, we have shifted our revenue mix towards supply chain and dedicated with 60% of 2025 revenue expected to come from these asset light businesses compared to 44% in 2018.
Robert Sanchez: As a reminder, 93% of our revenue is generated in the U.S
Robert Sanchez: 2025 Comparable EPS is expected to be between 1285 and 1360, more than double 2018 Comparable EPS of 595.
Robert Sanchez: ROE is expected to be 16.5 to 17.5% up from the 13% generated during the prior cycle peak.
Robert Sanchez: As a result of profitable growth in our contractual lease dedicated in supply chain businesses, operating cash flow is expected to increase to 2.5 billion, up approximately 50% from 2018.
Robert Sanchez: As shown here in 2025, the business is expected to continue to outperform prior cycles, even when comparing prior peak to the current market conditions [inaudible]
Robert Sanchez: We're proud of the strong performance of our transform business model and believe that executing on our balance growth strategy will continue to deliver higher highs and higher lows over the cycle. I'll now turn the call over to Christy to review our first quarter performance.
Christy: Thanks Robert. Total company results for the first quarter are on page 6.
Christy: Operating revenue of 2.6 billion in the first quarter, up 2% from the prior year, primarily reflects the prior year acquisition and contractual revenue growth in supply chain and FMS, partially offset by lower rental.
Christy: Comparable earnings per share from continuing operations were $2.46 in the first quarter, up from $2.14 in the prior year. The increased reflects higher contractual earnings in all segments partially offset by weaker market conditions in rental and use vehicle sales.
Robert Sanchez: Return on Equity, our primary financial metric, was 17% as Robert previously mentioned.
Robert Sanchez: Recastlow increased to positive $259 million from $13 million in the prior year reflecting lower capital expenditures.
Turning to Fleet Management Results on page 7 [inaudible]
Robert Sanchez: Fleet Management Solutions, operating revenue increased 1% due to higher choice lease revenue, partially offset by lower rental demand, choice lease revenue grew 3% [inaudible]
Robert Sanchez: Three tax earnings in fleet management were $94 million, down year over year as higher choice lease performance, driven by pricing and maintenance cost savings initiatives, was offset by lower rental demand and use vehicle gains.
Robert Sanchez: Rental utilization on the power fleet was 66 percent in line with prior year. The rental fleet declined 3 percent year-over-year
Robert Sanchez: Rental results for the quarter continued to reflect market conditions that remain weak and the sequential decline in rental demand was below historical trends.
Power Fleet Pricing was up 2%
Robert Sanchez: Fleet Management EBT as a percent of operating revenue was 7.5% in the first quarter below our long-term target of low teens over the cycle.
Page 8 highlights U Vehicle Sales Results for the Quarter
Robert Sanchez: Year-over-year use tractor proceeds declined 16% and use truck proceeds declined 17%.
Robert Sanchez: on a sequential basis proceeds for tractors decrease 7% and proceeds for trucks decreased 8%. These single digits sequential declines were in line with our expectations.
Robert Sanchez: The sequential decline in tractor pricing reflects the sale of aged inventory in the quarter. Excluding this activity, tractor pricing was up 3% sequentially, primarily driven by sleeper
Robert Sanchez: We expect sales of aged inventory to continue in the second quarter as we manage through our inventory levels.
Robert Sanchez: We were encouraged to see pricing on sleeper tractors increase sequentially.
Robert Sanchez: During the quarter, we sold 5,100 used vehicles, up sequentially and down from the prior year. Use vehicle inventory increased to 9,500 vehicles and was slightly above our targeted inventory range.
Robert Sanchez: Although use vehicle pricing declined, proceeds remain above residual value estimates used for depreciation purposes. Slide 19 in the appendix provides historical sales proceeds and current residual value estimates for use tractors and trucks for your information.
Turning to Supply Chain on page 9
Robert Sanchez: Operating revenue increased 3% driven by new business and higher customer volumes.
Robert Sanchez: Supply chain earnings increased 35 percent from prior year, primarily reflecting improved operating performance from strategic initiatives and new business
Robert Sanchez: Supply Chain EBT as a percent of operating revenue was 8.7 percent in the quarter, in line with the segment's long-term target of high single digits.
Robert Sanchez: Moving to dedicated on page 10, operating revenue increased 8% reflecting the prior year acquisition completed in February of 2024.
Robert Sanchez: Dedicated EBT increased 50% year-over-year reflecting acquisition synergies as well as prior year integration cost
Robert Sanchez: DTS results also continue to benefit from strong performance of our legacy dedicated business reflecting pricing discipline as well as favorable market conditions for recruiting and retaining professional drivers.
Robert Sanchez: Dedicated EBT as a percent of operating revenue was 5.9 percent in the quarter below the segment's long-term high single digit target.
Robert Sanchez: I'll now turn the call over to John to review capital spending and capital deployment capacity.
John: Turning to slide 11, first quarter leaf capital spending of 413 million was below prior year, reflecting lower leaf sales activity.
John: Rental capital spending of 78 million was in line with prior year. For four year 2025, the spending is expected to be 2.1 billion reflecting replacement activity.
John: We expect the size of the leaflet to remain fairly constant throughout the year.
John: Rental capital spending is now expected to be 300 million, down from approximately 400 million in our prior forecast, reflecting our revised outlook.
John: Our ending rental fleet is expected to decrease 9% during 2025 and our average rental fleet is expected to be down 4% The rental fleet remains well below peak levels as we manage through an extended market downturn
John: In rental, we've continued to shift capital spending to trucks versus tractors. At UN 2024, trucks represent approximately 60% of our rental fleet.
John: Our full-year 2025 Capitol Expenditures forecast of approximately 2.6 billion is in line with prior year
John: We expect approximately 500 million in proceeds from the sale of used vehicles in 2025.
John: 4-year 2025 net capital expenditures are expected to be approximately 2.1 billion
Attorney to page 12 Paul
John: In addition to increasing the earnings and return profile of the business, our transform contractual portfolio is also generating significant operating cash flow. Improving the overall cash generation profile of the business is one of the essential elements of our balance growth strategy. Thank you.
John: Better Ernie's performance is driving higher cash flow generation and in turn is delivering our balance sheet at a more rapid pace. This momentum is creating incremental debt capacity given our target leverage range between two and a half to three times.
John: As shown on the slide, over a three year period, we expect to generate approximately 10 billion from operating cashflow and use vehicle sales proceeds [inaudible]
John: This creates approximately 3.5 billion of incremental debt capacity, resulting in 13.5 billion available for capital deployment.
John: Over the same three-year period, we estimate approximately 9 billion will be deployed for the replacement of leads in rental vehicles and for dividends
John: Leaving around 4 billion of capital available for flexible deployment to support growth and return capital to shareholders.
John: We estimate about half of this capacity will be used for growth cap-backs [inaudible]
John: and the remaining to be available for discretionary sharing purchases and strategic acquisitions and investments.
John: Our capital allocation priorities remain unchanged, and our focus on supporting our strategy to drive long-term profitable growth and return capital to shareholders.
Our top priority is to invest in organic growth
John: We've taken a balanced approach to investing and since 2021 have invested approximately 1.1 billion in strategic acquisition and have deployed approximately 1.1 billion for discretionary sharing purchases.
Reducing our share count by 20%
John: Our balance sheet remains strong with leverage of 259% a quarter end at the lower end of our target range and continues to provide ample capacity to fund our capital allocation priorities.
Robert Sanchez: With that, I'll turn the call back over to Robert to discuss our outlook.
Robert Sanchez: Turning to our outlook on page 13, our full year 2025 comparable EPS forecast is updated to a range of 12.85 to 13.60 to a range of 12.85 to a range of 12.
Above prior year of $12 $12.
Robert Sanchez: As higher contractual earnings and the benefits from our strategic initiatives offset the impact from market conditions in rental and use vehicle sales.
Robert Sanchez: Our updated forecast reflects a more muted macroeconomic environment than our prior forecast, which is expected to primarily impact rental demand.
Robert Sanchez: Class A production in the US is now expected to be down 20% whereas our initial forecast expected it to be up 1%
Robert Sanchez: Our second quarter comparable EPS forecast range is 3 to 325 versus prior year of $3
and assumes weaker rental demand. . .
Robert Sanchez: Our 2025 ROE forecast range is revised to 16.5% to 17.5% to 17.5% to 17.5% to 17.5% to 17.5%
from 17 to 18%, reflecting our updated outlook.
Robert Sanchez: The revised range remains in line with our expectations given current market conditions.
Robert Sanchez: The extended freight downturn and economic uncertainty continue to cause some customers and prospects in lease dedicated and supply chain to delay decisions or downsize their fleets.
Robert Sanchez: These near-term contractual sales headwinds are consistent with current market conditions.
For more information visit www.FEMA.gov
Robert Sanchez: We remain confident in the long-term secular growth trends for all our businesses and in the value our solutions bring to our customers.
Robert Sanchez: We remain focused on our initiatives and our confident that our transform business model is capable of performing across a range of business environments.
Turning to page 14 Thank you.
Robert Sanchez: The key driver of expected earnings growth in 2025 is incremental benefits from multi-year strategic initiatives that are well underway and related to our contractual lease dedicated to supply chain businesses.
We have good visibility to these initiatives.
Robert Sanchez: They represent structural changes we're making to the business and are not dependent on a cycle upturn.
Robert Sanchez: Upon completion, we expect these initiatives to generate annual pre-tax earnings benefits of approximately 150 million which will be a key component to achieving our long-term ROE target of low 20s over the cycle [inaudible]
Robert Sanchez: In FMS, we expect to realize an incremental annual benefit of approximately 20 million in 2025 from our lease pricing initiative.
Robert Sanchez: This results in a total 125 million dollar benefit relative to our 2018 run rate reflecting portfolio pricing under the new model.
Robert Sanchez: We expect $50 million in benefits from the Multi-Year Maintenance Cost Savings Initiative announced in mid-2024.
Robert Sanchez: and DTS. We expect to realize 40 to 60 million in annual synergies from the Cardinal acquisition at full implementation.
Robert Sanchez: The majority of these synergies are related to maintenance efficiencies and replacing third party operating leases with the benefits of Ryder ownership and asset management.
Robert Sanchez: In SCS, we are focused on optimizing our Omnichannel Retail Warehouse Network through continuous improvement efforts, driving operational efficiencies, and better aligning our footprint with the demand environment.
Robert Sanchez: Since the second half of 2024, we have seen improved productivity in this vertical as a result of these actions and expect incremental benefits going forward.
Robert Sanchez: By 2025, we expect to realize benefits of approximately 100 million from these collective initiatives.
approximately 70 million of these benefits are incremental to 2024. For more information, visit our website at WWW.TV.com
Robert Sanchez: In addition to continuing to increase the return profile of our contractual businesses, we are also focused on ensuring the business is well positioned to benefit from the cycle upturn.
Robert Sanchez: Although the majority of our revenue is supported by long-term contracts that generate relatively stable and predictable operating cash flows over the cycle, each business segment has meaningful opportunity to benefit from the cycle upturn.
Robert Sanchez: We expect the majority of the $200 million benefit to come from the cyclical recovery of rental and use vehicle sales and FMS.
Robert Sanchez: In dedicated, improved driver availability and lower recruiting and turnover cost are benefiting earnings but have been ahead when for sales and revenue growth.
Robert Sanchez: as Freight Capacity Titans and Driver Availability Becomes More Challenging. We expect to see incremental sales opportunities and improve revenue growth in DTS.
as private fleets seek solutions to address this pain point.
Robert Sanchez: In supply chain, weaker volumes in our Omni Channel retail vertical have been a headwind to revenue and earnings [inaudible]
Robert Sanchez: We expect supply chain results to benefit as volumes for these services recover and our optimized warehouse footprint is leveraged.
Robert Sanchez: We've been pleased by the business's resilience and performance during the extended freight downturn and are confident each of our three business segments is appropriately positioned to benefit from the cycle upturn.
Turning to page 15 [inaudible]
Robert Sanchez: Our Transform Business Model continues to deliver value to our customers and shareholders.
Robert Sanchez: We continue to outperform prior cycles and our results are benefiting from consistent execution and the strength of our contractual portfolio.
Robert Sanchez: We continue to see significant opportunity for profitable growth, supported by secular trends, our operational expertise, and ongoing momentum from multi-year strategic initiatives.
Robert Sanchez: We remain committed to investing in products, capabilities and technologies that will deliver value to our customers and our shareholders.
Robert Sanchez: That concludes our prepared remarks. Please note that we expect to file our 10Q later today. At this time, I'll turn it over to the operator to open the call for questions.
Robert Sanchez: Thank you. If you'd like to have a question, please signal by pressing star one on your telephone keypad.
Speaker Change: If you are using this speaker phone, please make sure your mute function is turned off to Liar Signulatory Characlidment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.
We'll go first to Jordan Alliger with Goldman Sachs [inaudible]
Yeah, hi, good morning. Just a couple things. One.
Jordan Algier: Can you maybe talk a little bit more about the used vehicle market, sort of your thoughts around how that could shake out? Maybe more in the context of what are the puts and takes?
Jordan Algier: in terms of how that develops, in terms of support or lack thereof for the used truck markets through the year. And then secondly, can you talk about when you do one of your leases in FMS, I think they're six-year deals?
Jordan Algier: What are you taking into consideration when you set up pricing? So once the new pricing initiatives run off, are you guys targeting a return on that contract over the six years of margin? Just get some clarity on that. Thank you.
Jordan Algier: Okay, thanks, George. The first round around UVS, I guess a simple way to put it is what we're seeing in UVS is consistent with what you're originally expected when we game our forecast at the beginning of the year.
Jordan Algier: You know, we're Sanchez down. You saw that we reported it was down a single digit sequentially, but a lot of that was really due to the fact we were selling some age inventory. If you exclude that, we were actually up specifically up tractors.
Jordan Algier: Which is really the area that I think we're most closely watching
Jordan Algier: We expect to still be self-evasive inventory in Q2, but then as we get into the second half of the year.
Jordan Algier: We expect that to move much more to retail, but we are seeing as we've been talking about the last several cores we've been seeing use truck pricing sort of
Jordan Algier: Bump it along the bottom, especially around tractors, Troy's still coming down some more. I think with the drop in new tractor production for this year, the drop in the estimate.
Jordan Algier: That should be beneficial for use trucks as you got less supply coming into the market.
Speaker Change: and therefore gives us a chance to finish working through, as I would say, as a market, finish working through the inventories that are out there. But let me hand it over to Thompson to give you a little bit more color.
Tom Havens: and some aged inventory. And we're expecting to continue that a little bit here in the second quarter, but when you get to the second half of the year, we don't expect that to.
Tom Havens: to continue, which will kind of naturally increase the price per unit going forward. When you strip all of that out and just look at the underlying trends, the pricing in retail is flatish.
Tom Havens: We go through the different classes. We mentioned that sleep repricing was actually up, which was a good sign. Additionally, I'll just mention a couple of comments about the inventory trends.
Tom Havens: Although the inventory is not year over year, the inventory is flipped from tractors to trucks, so tractor inventory is down quite a bit.
Tom Havens: Almost 1700 units, that's offset by the truck inventory, by going up. We like that better. The tractor inventory is historically more difficult to work through, and we feel that the tractor inventory is in line and very manageable.
Tom Havens: and the elevated truck inventory. Historically, we've been able to work through that, so we feel pretty good about those inventory trends and what that will mean in the future as well.
Tom Havens: I'll try to answer your second question on how we price lease deals, but we target a basis point spread versus our whack
Um, um,
Tom Havens: and we look for a target that's between 150 Bip Spread from our whack and
Tom Havens: We've seen that here now for a number of years in that targeted range and we continue to see that spread here in the first quarter.
We certainly expect that to continue.
Tom Havens: The other thing you remember is that Tom also has a maintenance optimization maintenance cost initiative which he's continuing him and his team are continuing to execute on so that will still . . .
Tom Havens: I worked through the next couple of years and as you know I would assume as those roll-off will look for another set of initiatives to go after but yeah the goal is to continue to target the 150 basis point spread while continuing to look for initiatives to improve returns over time.
Thank you.
Thank you, Jordan [inaudible]
Tom Havens: If you find that your question has been answered, you may remove yourself from the queue by pressing the star key probably by the digit 2.
We'll go next to Christine McGarvey with Morgan Stanley Stanley.
Good morning, thank you for taking my questions [inaudible]
Speaker Change: Maybe they think about giving some of the macro visibility being quite limited. It's obviously a much different company than we were anytime.
Speaker Change: We had an outright consumer recession, so if you can talk a little bit about that kind of scenario, what sort of macro assumptions are in the low end of the guy currently, and if we do some to talk ourselves into a recession here, what the earnings profile might look like. [inaudible]
Speaker Change: Yeah, a great question, Christine. Listen, I think, first of all, the outlook that we have is reflecting really a more muted economic environment, primarily due to the market uncertainty that we're seeing on the top end of the range. It's really driven by lower expected rental demands. Thank you very much.
We're just seeing a rental software in Q2, we're assuming that...
Speaker Change: creates a new baseline going forward. Use vehicle sales, we think is in line with our prior guidance and we're assuming that continues. So truly, I would say the top end of our range is really a reflection of what we're seeing today in the marketplace as we sit here in April .
Speaker Change: The low end of that range would assume further deterioration in the transactional businesses.
Speaker Change: really around our Redsland Use Medical Sales as we get into the second half of the year.
Speaker Change: But again, as you can see, even on the low end of the raid, we're still expecting earnings growth year over year. And we feel really good about that. And I think that's really...
to your earlier point of health, different. All right.
Speaker Change: Ryder is, today versus where it's been at other times. A lot less dependent on-
Speaker Change: The transactional rental and use truck market to hit our earnings numbers, and it shows the stability and resilience of the contractual businesses you look at.
in our supply chain.
Speaker Change: Earnings are up 35%, dedicated earnings are up 50% grand, there's some acquisition in there, even FMS lease margins are up also, so the contractual business is even in this uncertain period to continue to provide.
Speaker Change: Earnings Growth, and again, not to forget all the initiatives that we're working. We're talking about 70 million
Speaker Change: of initiatives that we have this year that are really the drivers of the earnings growth. So we feel really good about our ability to execute on those. We team executed really well in the first quarter and expect that to continue to do through the balance of the year.
I appreciate the color. Thank you
Thank you.
We'll go next to Jeff Kaufman with Vertical Research Partners.
Jeff Kaufman: Thank you very much and good morning and congratulations in the tough environment.
Speaker Change: I want to ask maybe a question and a half here if I could [inaudible]
in terms of...
Speaker Change: Some of the things you look at, so for instance, Canary and the coal mine type stuff, run-offly utilization, miles driven, asusorial charges, things like that, what's the Canary telling you?
Speaker Change: in terms of some of those early demand early utilization cycles and then just a follow-up on cash flow if I can.
Okay, I'll let John give you some color on the...
Speaker Change: We did see softer conditions as we exited first quarter and into the month of April than what we had anticipated.
What I will say is that unique within that door is...
Speaker Change: We have seen some early signs as we finished the quarter and started second quarter of the quarter.
of capacity coming out of the market and stabilization.
Speaker Change: around over-the-road tractor activity. That is also supported if you look at our least miles on tractors throughout the year over a year on a per unit basis.
Speaker Change: But if you're looking for some early activity, I would say on the sleeper and tractor classes, especially the sleeper class, we're seeing some positive momentum there, which we hadn't seen for some time [inaudible]
Speaker Change: Okay, thank you, and thank you for the clarity on the use vehicle pricing differences because that didn't seem to match the markets either at first glance. Lastly, thank you for the update at Cash Flow Guidance.
Speaker Change: And I was just kind of wondering, you talked a little bit about share by back, you talked a little bit about dividend Not any real discussion on M&A and you're kind of anniversary the M&A transactions of a year or two ago, I would think an uncertain environment
Speaker Change: and weaker demand might present an interesting opportunity on some of the M&A front. Can you talk a little bit about what would be on the wish list in terms of potential opportunities there?
Speaker Change: Yeah, you know, you're right. It should be a good time to find, if we find the right company, we are, we're always in the market, we're looking [inaudible]
Speaker Change: We're looking for companies where we could maybe bring some new capabilities, new verticals if you will in the supply chain Anything that we could do around another type of cardinal dedicated opportunity, we would...
Speaker Change: certainly be interested in and then obviously any tuck-ins in our lease business. That's really the three types of companies we look for. We want well-run companies that have a culture that could match well with Ryder's.
Speaker Change: So, we are out looking, we're going to pull the trigger and we find the right one [inaudible]
Speaker Change: And that's really what right now that's we we we hope for at some point we'll find another good one and we'll bring it in but you know the good news is that our our our
Speaker Change: Long-term targets are generally not dependent on a lot of acquisitions. I mean, on the supply chain side probably to close the gap on some of that digital growth, we wouldn't want something in the future.
but generally the...
Speaker Change: The earnings and return profile are not completely dependent on acquisitions.
Okay, thank you very much.
Thanks, Joe.
We'll be next to Scott Group with Wolf Research to be.
Speaker Change: Hey, thanks. Good morning. So I want to start on supply chain. You know, historically there's a lot of auto exposure there. You talk a lot about now on the channel. I guess those end markets seem to be somewhat in the crosshairs of
Speaker Change: Harris, I'm guessing just what you're seeing from end market perspective there and what sort of potential risk you see is with tariff, or we're not thinking about the business right and maybe it's more insulated.
Speaker Change: Yeah, I'll let Steve give you some more background on that, but I'll start by telling you Remember Auto, the best majority of the auto work we're doing are with US assembly plants.
Steve Sensing: So we've actually seen relatively stable activity there with several customers really looking more closely at bringing more production into the US, which would be I think a positive.
Steve Sensing: on that. And on the Amity Chair, you got some cross currents. I'll let Steve give you a little bit of color on what we're staying there.
Steve Sensing: Yes, Scott. Robert said if you think about our auto business, I think we've got a real diverse set of OEMs that we support, you know, primarily inbound and manufacturing. So in the majority of those cars are sold in the US.
Steve Sensing: So we see kind of like very little impact there. CPG, same thing, manufacturing here in the U.S. for U.S. Consumption. So
Steve Sensing: Little to no impact there. I'd say that you know the area that we're watching right now is the omnichannel piece certainly from a...
across our transactional business.
Steve Sensing: The majority of those customers have options in countries that they produce in.
Steve Sensing: So we're working closely with those customers. So I think that kind of gives you good summary on it. Yeah, the cross currents there are really around the ones that are the ones that are shipping from China you're seeing a slow down there but the ones that are shipping from other countries are seeing it maybe a pull forward or an acceleration there so slow down.
Steve Sensing: Again, that's kind of the color across the verticals, but in general, I'd say the majority of the work that we're doing in supply chain is really not seeing a big impact in the future.
Coyne.
Steve Sensing: or maybe not because of tariff, I don't know. But any color would be helpful. Thank you.
Steve Sensing: I'll let Christy answer the question on the residuals. Yeah, I've got so what we're seeing is we would need another 5% drop in pricing levels from where they are today in the first quarter in order to get down to the bottom end of our residual estimates.
Steve Sensing: So, we still have room and our forecast, you know, we talked about how tractor pricing is looking favorable for bunch of leaks So, we are expecting that to rise over the next couple of quarters here So, we're not concerned over what's happening there [inaudible]
And I guess to answer your question on, on... [inaudible]
Steve Sensing: New Vehicle Cost, New Vehicle Pricing Week, as you know, we buy it directly from the OEs.
Steve Sensing: In this environment, maybe a little bit of opportunity, but generally our pricing with them is relatively stable. I would also add that, you know, given the talk of tariffs.
Steve Sensing: We kind of see, right now, our exposure, the way things start today, our exposure is relatively limited and I would say minimal.
on the new vehicle side.
Steve Sensing: The majority of the vehicles that we're purchasing are USMCA compliant. I say all the vehicles that we're purchasing are USMCA compliant therefore as long as that agreement or some version of that agreement remains in place [inaudible]
Steve Sensing: I would expect that the pricing impact on the new vehicles would be minimal and whatever that pricing impact is, we would certainly pass through to customers as part of our leases [inaudible]
Steve Sensing: So that's generally what we're seeing around parts, we're seeing a small increase but again very limited, again based on the parts that we buy and the place of origin of those parts.
Thank you.
Very helpful. Thank you, guys
Thank you, Scott.
We'll go next to Daniel Embro with Stevens Inc.
Thank you.
Speaker Change: Hey guys, this is Reed C on for Daniel. I can't stay on the subject of supply chain solutions.
Speaker Change: One of your bigger segments is the distribution management where you do a lot of warehousing I think
Speaker Change: We've heard a lot more activity in this space recently, if y'all seen the same and if you could extrapolate kind of what you're seeing there and to maybe some demand later in the truck load market, just any takeaways there would be much appreciated.
Alright, let me hand that over to Steve
Steve Sensing: Yeah, I think as you think about the warehouse inside of the business, you know, we've seen in the core, we've seen volumes increase in CPG and
Steve Sensing: and Omnichannel, primarily our legacy retail business. So, you know, we haven't seen any decline there, you know, at that point.
Steve Sensing: Demand, if you think about the pipeline right now, our pipeline is relatively flat year over year and sequentially Still healthy and we're seeing those opportunities come through in the warehouse I think so [inaudible]
Speaker Change: Thank you. In fact, I can just follow up real quick on the dedicated type. We've heard from a lot of peers that this remains pretty competitive if you just provide some color on how pricing there is, maybe how the pipeline shaping up.
Steve Sensing: and maybe any business ones that you've been able to pull off versus losses.
Steve Sensing: I would say kind of the same thing for the pipeline activity and dedicated relatively flat as you look at it. Decision is still being delayed, you know, now six to nine months in both portfolios.
Steve Sensing: We're customers continue to go after price and trade price for cost, so they're really looking at the spot market, and then we're also seeing some of those customers with fleet reduction and network changes, so we're helping in some situations where our customers are also optimizing their networks.
Steve Sensing: As far as price, we're saying price discipline on these deals and continue to see the opportunity. You know, I just got into that, remember,
Steve Sensing: The dedicated segment that we operated is the specialized dedicated.
Steve Sensing: Traded for truck load. So I'm not that we don't have any of that because we have some of it but I think the more specialized dedicated you maybe have gotten just a different pricing dynamic there. [inaudible]
Got it. Thank you for the color, Grace.
Thank you.
For the next two, Brian Ossenbeck with JP Morgan. [inaudible]
Speaker Change: Residual Range, I guess you can walk us through what would happen if that happened next quarter, would there be immediate adjustments or does that have to stay below that range for a period of time before you make an adjustment? Like what are the implications and sort of next steps if we do see another leg down there?
Speaker Change: Yeah, Brian , so no, I mean, we are monitoring it closely. Obviously we mentioned how our forecast right now is where it is and it includes some of this impact of wholesaling because we're trying to get through the age inventory. We are monitoring it.
Speaker Change: which we're expecting to continue through the second quarter and from then forward we are expecting pricing to come back up.
Speaker Change: just based on market trends that we're seeing based on what we saw excluding this age inventory as well as inputs that we get from other third parties that are seeing similar trends. But I'm putting that aside.
Speaker Change: We do look at it. I mean, if there were to be a decline in the, you know, in the near future down to that 5% anything that's sitting at our use truck centers would would have a, you know, incremental. That's all that.
Charge associated with it. However, in our guidance for-
Speaker Change: For the year, we have a low end and a high end, and we did say that the low end would cover any potential downside, and we think we're more than covered by...
by anything that could happen, but...
Speaker Change: Again, what we're seeing is more positive and you know, we don't think that any of it would be sustained at this level and that's really the key we got to make sure you know, we make sure that it's just a current phenomenon and that's something that may extend over a long period of time
Speaker Change: Yeah, I mean, as a reminder, you can see it on the chart. That that bottom end is that
Speaker Change: The low end of where the market has gone only twice in the last 20...
Speaker Change: six years. And it went for one quarter. So I think that's kind of another point there, but the fact that you got that historical perspective and we're seeing.
tractor pricing beginning to move up.
Speaker Change: especially for sleepers, but even on the day caps got on a retail-based generally flat. I think that's a pretty good indicator of where things are, but again, we think we're well positioned for that .
Speaker Change: Okay, got it. And then it's another question on just the ETA standards, excuse me, on 227 and some of the other ones more broadly. And he said it's not necessarily a material impact for Ryder, but we are hearing
Speaker Change: signs that, you know, people are cutting their CapEx rather and not really doing much of a pre-buy or at least putting that on hold. Are you hearing and seeing something similar? And, you know, I guess just to reconfirm what that would really do to your business or what you have sort of baked in for the rest of this year.
Speaker Change: Yeah, so I would say we haven't baked anything in for a pre-buy for this year and as it relates to our business we're not a dealer so we wouldn't have a big spike in sales.
Speaker Change: So, not a big impact in the near term, either way. I think in the long term we had talked about a pre-bite might create some uplift.
Speaker Change: on use truck values, maybe three years out, four years out, which is what happened during the last big change, but I think it's important, that would have been nice if it happens, but it's not anything we're counting on.
Speaker Change: It's not anything that we put in our pricing releases, and it's not anything that we've contemplated as we've laid out our long term
Speaker Change: Targets for our business, our ROE or any of our earnings targets. So just want to make sure we're on that. It would be gravy, I guess, if it happened, longer term for e-struck sales.
Okay, appreciate that context. Thank you
[inaudible]
and John Diaz. Thank you. Thank you.
Thank you.
We'll go next to Harrison Bauer with Seth Gujana.
Speaker Change: Great, thanks for taking my question. Last quarter you provided a pretty clear bridge on EPS to the top end of the range. You mentioned sort of qualitatively
Speaker Change: that the commercial rental segment was was a big driver of the top end of that range declining. Is that the whole of the 35 cent decline on the top end of the range?
Speaker Change: Yes, that's a good way to look at it. Basically, if you think about that waterfall, that upside that we had on rentals, we're basically taking that away.
Speaker Change: Okay, thanks for the remaining things, for actual earnings. I would just have the remaining contractual earnings expectations in that waterfall remaining tax.
Speaker Change: Okay, thank you for that. And then we're also seeing the spread between new and used vehicles sort of trend to an all-time high. How might you think that will flow through to your used vehicle pricing, particularly towards the second half of the year when you cycle through some of your older inventory and any sort of kill wins you might see to that sort of entering 2026. Thank you. Thank you very much.
Speaker Change: Yeah, I think as the new truck pricing has gone up, that creates lift for use truck pricing. And I think the use truck pricing, again, as you can see on that chart, we've been seeing that pricing come back down, getting down to kind of trough levels.
Speaker Change: Typically, in the market place, once you get to those levels, you see companies and sellers, if you will, start to look for ways of getting that pricing back up.
Speaker Change: It really starts to come down. That's where you start to see now more pricing. And again, we started seeing in the first quarter. Again, short of the aged inventory that we got out of, we saw tractor pricing really start to move up. For the first time in, I guess it's been a couple years. [inaudible]
Speaker Change: So that's a really good sign and something that we, again as we're sitting here in April , we're continuing to see that trend. We actually, I should probably point out that we actually raised...
Speaker Change: Christ is on sleep for tractors for the first time in the last couple of years, this last month.
John Diez,
Great, thank you.
Thank you.
Speaker Change: At this time there are no additional questions. I'd like to turn the call back over to Mr. Robert Sanchez for closing remarks.
Speaker Change: Okay, well thank you all for your interest in Ryder and look forward to speaking with you soon as we get out and into some of the conferences. Thank you.
That concludes today's conference. Thank you all for your participation for your participation.
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