Ryder System Q1 2025 Earnings Report

Ryder System EPS Results

• Actual EPS: $2.46
• Consensus EPS: $2.40
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $2.14

Ryder System Revenue Results

• Actual Revenue: $3.13 billion
• Expected Revenue: $3.17 billion
• Beat/Miss: Missed by -$34.21 million
• YoY Revenue Growth: +1.10%

Ryder System Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 23, 2025
• Conference Call Time: 11:00AM ET

Ryder System (NYSE:R), commonly known as Ryder, is a leading provider of transportation, logistics, and supply chain management solutions. Based in Miami, Florida, the company operates in North America, Europe, and Asia and has been in business for over 85 years. Ryder offers many services, including fleet management, dedicated transportation, supply chain optimization, and last-mile delivery solutions. With a fleet of over 230,000 vehicles, Ryder serves customers across various industries, including healthcare, food and beverage, retail, and e-commerce.

Robert Sanchez has been Ryder's Chairman and Chief Executive Officer since 2013. Before he was appointed CEO, Sanchez served in various executive roles at the company, including President of Global Fleet Management Solutions and Chief Financial Officer. The rest of the company's senior leadership team includes Karen Jones, Executive Vice President and Chief Marketing Officer and John Diez, Executive Vice President and Chief Financial Officer.

In recent years Ryder has reported total revenue increases. Net income is also moving in a positive direction. The company's debt levels have remained relatively stable over the past few years, with total debt of around $11 billion. Ryder's price-to-earnings ratio and price-to-book ratio are both below the industry average. Over the past few years, Ryder's stock price has increased, outperforming the broader market. The company's stock has also experienced decreased trading volume, with an average daily volume of 309,000 shares.

The transportation and logistics industry has experienced significant growth in recent years, driven by the rise of e-commerce and the increasing importance of supply chain management. The COVID-19 pandemic has further accelerated this trend, as companies have had to adapt rapidly to changing consumer behavior and supply chain disruptions. However, the industry also faces rising fuel costs, driver shortages, and increasing regulatory scrutiny.

Ryder competes with many large companies in the transportation and logistics space, including XPO Logistics, Inc., J.B. Hunt Transport Services, Inc., and United Parcel Service, Inc. The company differentiates itself by offering a wide range of services, from fleet management to last-mile delivery, and investing in technology and innovation to improve efficiency and reduce costs.

Ryder sees significant growth opportunities in several areas, including e-commerce fulfillment, autonomous trucking, and electric vehicles. The company recently announced a partnership with Embark Trucks to develop and deploy autonomous trucks for long-haul routes, which could significantly reduce costs and improve efficiency. Ryder is also investing in electric vehicles, with plans to add 1,000 electric trucks to its fleet by 2023.

In addition, Ryder is focused on expanding its presence in the e-commerce fulfillment space, where demand has surged in recent years. The company offers a range of solutions to help retailers and e-commerce companies manage their supply chains, including warehouse management, transportation management, and last-mile delivery.

Like all companies in the transportation and logistics industry, Ryder faces many risks and challenges. These include rising fuel costs, regulatory scrutiny, and supply chain disruptions. In addition, the company faces increasing competition from new entrants, such as Amazon and Uber Freight, which could put pressure on pricing and margins.

Another challenge Ryder faces is the ongoing driver shortage, exacerbated by the COVID-19 pandemic. This has led to higher driver wages and increased competition among companies for a limited pool of qualified drivers. Ryder is working to address this challenge by offering competitive salaries and benefits, investing in driver training programs, and exploring the use of autonomous and electric vehicles.

Ryder is subject to various regulatory and legal risks, including potential changes to environmental regulations and labor laws. The company has committed to reducing its carbon emissions and improving sustainability across its operations, which could help mitigate some of these risks.

Ryder System Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to the Ryder System First Quarter twenty twenty five Earnings Release Conference Call. All lines are in listen only mode until after the presentation. Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce Ms.

[Operator]

Kayleen Candela, Vice President, Investor Relations for Ryder. Ms. Candela, you may begin.

[Calene Candela, VP - Investor Relations at Ryder System]

Thank you. Good morning, and welcome to Ryder's First Quarter twenty twenty five Earnings Conference Call. I'd like to remind you that during this presentation, you'll hear some forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political, and regulatory factors.

[Calene Candela, VP - Investor Relations at Ryder System]

More detailed information about these factors and a reconciliation of each non GAAP financial measure to the nearest GAAP measure is contained in this morning's earnings release, earnings call presentation and in filings with the Securities and Exchange Commission, which are available on Ryder's website. Presenting on today's call are Robert Sanchez, Chairman and Chief Executive Officer John Diaz, President and Chief Operating Officer and Kristi Gallo Aquino, Executive Vice President and Chief Financial Officer. 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.

[Robert Sanchez, Chairman & CEO at Ryder System]

Good morning, everyone, and thanks for joining us. I'm proud of our team for delivering double digit earnings growth during the first quarter, in line with our forecast. The business continues to outperform prior cycles, driven by our high quality contractual portfolio and reflecting the actions we've taken under our balanced growth strategy to derisk the business, increase the return profile and accelerate growth in our asset light SCS and businesses. I'll begin today's call by providing you with a strategic update. Christy will then take you through our first quarter results, and John will review capital expenditures and our increasing capital deployment capacity.

[Robert Sanchez, Chairman & CEO at Ryder System]

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 four. Turning to Slide four, our transformed business model and execution of our balanced growth strategy continue to drive earnings growth. We remain on track to realize the benefits from our strategic initiatives outlined during our February earnings call. These benefits are the key driver of the year over year earnings growth we are expecting.

[Robert Sanchez, Chairman & CEO at Ryder System]

Long term secular trends that favor 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. 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. We generated ROE of 17% for the trailing twelve month period, which is in line with our expectations for an extended freight cycle downturn and continues to demonstrate the resilience of our transformed business model. Earnings growth in our contractual businesses reflects the value proposition and pricing discipline embedded in our high quality contractual portfolio.

[Robert Sanchez, Chairman & CEO at Ryder System]

We expect our transformed and cycle tested business model to continue to outperform prior cycles. 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. During the quarter, we returned $2.00 $2,000,000 to shareholders by repurchasing 1,100,000.0 shares and paying our quarterly dividend. Since 2021, we have repurchased approximately 20% of our shares outstanding and increased our dividend approximately 40%. We increased our 2025 forecast for free cash flow to a range of $375,000,000 to $475,000,000 primarily due to lower expected capital spending.

[Robert Sanchez, Chairman & CEO at Ryder System]

Slide five illustrates how key financial and operating metrics have improved since 2018, reflecting the execution of our strategy. In 2018, prior to the implementation of our balanced growth strategy, the majority of our $8,400,000,000 of revenue was from FMS. Rider generated comparable earnings per share of $5.95 and an ROE of 13%. Operating cash flow was $1,700,000,000 This was during peak freight cycle conditions. Now let's look at what we're expecting from Ryder today.

[Robert Sanchez, Chairman & CEO at Ryder System]

In 2025, a year in which freight market conditions are expected to remain near trough levels, our transformed business model is expected to generate meaningfully higher earnings and returns than it did during the 2018 peak. Through organic growth, strategic acquisitions and innovative technology, we have shifted our revenue mix towards supply chain and dedicated, with 60% of twenty twenty five revenue expected to come from these asset light businesses compared to 44% in 2018. As a reminder, 93% of our revenue is generated in The U. S. Twenty Twenty Five comparable EPS is expected to be between $12.85 and $13.6 more than double 2018 comparable EPS of $5.95 ROE is expected to be 16.5% to 17.5%, up from the 13% generated during the prior cycle peak.

[Robert Sanchez, Chairman & CEO at Ryder System]

As a result of profitable growth in our contractual lease, dedicated and supply chain businesses, operating cash flow is expected to increase to $2,500,000,000 up approximately 50% from 2018. 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. We're proud of the strong performance of our transformed business model and believe that executing on our balanced 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.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Thanks, Robert. Total company results for the first quarter are on Page six. Operating revenue of $2,600,000,000 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. Comparable earnings per share from continuing operations were $2.46 in the first quarter, up from $2.14 in the prior year. The increase reflects higher contractual earnings in all segments, partially offset by weaker market conditions in rental and used vehicle sales.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Return on equity, our primary financial metric was 17% as Robert previously mentioned. Free cash flow increased to positive $259,000,000 from $13,000,000 in the prior year, reflecting lower capital expenditures. Turning to fleet management results on page seven. Fleet Management Solutions operating revenue increased 1% due to higher choice lease revenue, partially offset by lower rental demand. Choice lease revenue grew 3%.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Pretax earnings in fleet management were $94,000,000 down year over year as higher choice lease performance driven by pricing and maintenance cost savings initiatives was offset by lower rental demand and used vehicle gains. Rental utilization on the power fleet was 66%, in line with prior year. The rental fleet declined 3% year over year. Rental results for the quarter continue to reflect market conditions that remain weak and the sequential decline in rental demand was below historical trends. Power fleet pricing was up 2%.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

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 eight highlights used vehicle sales results for the quarter. Year over year used tractor proceeds declined 16% and used truck proceeds declined 17%. On a sequential basis, proceeds for tractors decreased 7% and proceeds for trucks decreased 8%. These single digit sequential declines were in line with our expectations.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

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 tractors. We expect sales of aged inventory to continue in the second quarter as we manage through our inventory levels. We were encouraged to see pricing on sleeper tractors increase sequentially. During the quarter, we sold 5,100 used vehicles, up sequentially and down from the prior year.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Used vehicle inventory increased to 9,500 vehicles and was slightly above our targeted inventory range. Although used 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 used tractors and trucks for your information. Turning to supply chain on page nine. Operating revenue increased 3% driven by new business and higher customer volumes.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Supply chain earnings increased 35% from prior year, primarily reflecting improved operating performance from strategic initiatives and new business. Supply chain EBT as a percent of operating revenue was 8.7% in the quarter, in line with the segment's long term target of high single digits. Moving to dedicated on page 10, operating revenue increased reflecting the prior year acquisition completed in February of twenty twenty four. Dedicated EBT increased 50% year over year reflecting acquisition synergies as well as prior year integration costs. DTS results also continued 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.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Dedicated EBT as a percent of operating revenue was 5.9% in the quarter, below the segment's long term high single digit target. I'll now turn the call over to John to review capital spending and capital deployment capacity.

[John Diez, President & COO at Ryder System]

Turning to slide eleven, first quarter lease capital spending of $413,000,000 was below prior year, reflecting lower lease sales activity. Rental capital spending of $78,000,000 was in line with prior year. For full year 2025, lease spending is expected to be $2,100,000,000 reflecting replacement activity. We expect the size of the lease fleet to remain fairly constant throughout the year. Rental capital spending is now expected to be $300,000,000 down from approximately $400,000,000 in our prior forecast, reflecting our revised outlook.

[John Diez, President & COO at Ryder System]

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. In rental, we've continued to shift capital spending to trucks versus tractors. At year end 2024, trucks represented approximately 60% of our rental fleet. Our full year 2025 capital expenditures forecast of approximately $2,600,000,000 is in line with prior year.

[John Diez, President & COO at Ryder System]

We expect approximately $500,000,000 in proceeds from the sale of used vehicles in 2025. Full year 2025 net capital expenditures are expected to be approximately $2,100,000,000 Turning to page 12.

[John Diez, President & COO at Ryder System]

In addition to increasing the earnings and return profile of the business, our transformed 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 balanced growth strategy. Better earnings performance is driving higher cash flow generation and in turn is delevering our balance sheet at a more rapid pace. This momentum is creating incremental debt capacity given our target leverage range of between two and a half to three times. As shown on

[John Diez, President & COO at Ryder System]

the slide, over a three year period, we expect to generate approximately $10,000,000,000 from operating cash flow and used vehicle sales proceeds. This creates approximately 3 and a half billion dollars of incremental debt capacity, resulting in $13,500,000,000 available for capital deployment. Over the same three year period, we estimate approximately $9,000,000,000 will be deployed for the replacement of lease and rental vehicles and for dividends, leaving around $4,000,000,000 of capital available for flexible deployment to support growth and return capital to shareholders. We estimate about half of this capacity will be used for growth CapEx and the remaining to be available for discretionary share repurchases and strategic acquisitions and investments. Our capital allocation priorities remain unchanged and are focused on supporting our strategy to drive long term profitable growth and return capital to shareholders.

[John Diez, President & COO at Ryder System]

Our top priority is to invest in organic growth. We've taken a balanced approach to investing and since 2021 have invested approximately $1,100,000,000 in strategic acquisitions and have deployed approximately $1,100,000,000 for discretionary share repurchases, reducing our share count by 20%. Our balance sheet remains strong, with leverage of 259% at quarter end, at the lower end of our target range, and continues to provide ample capacity to fund our capital allocation priorities. With that, I'll turn the call back over to Robert to discuss our outlook.

[Robert Sanchez, Chairman & CEO at Ryder System]

Turning to our outlook on page 13, our full year 2025 comparable EPS forecast is updated to a range of 12.85 to 13.6 above prior year of $12 as higher contractual earnings and the benefits from our strategic initiatives offset the impact from market conditions in rental and used vehicle sales. Our updated forecast reflects a more muted macroeconomic environment than our prior forecast, which is expected to primarily impact rental demand. Class eight production in The U. S. Is now expected to be down 20%, whereas our initial forecast expected it to be up 1%.

[Robert Sanchez, Chairman & CEO at Ryder System]

Our second quarter comparable EPS forecast range is $3 to $3.25 versus prior year of $3 and assumes weaker rental demand. Our 2025 ROE forecast range is revised to 16.5% to 17.5% from 17% to 18%, reflecting our updated outlook. The revised range remains in line with our expectations given current market conditions. 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. These near term contractual sales headwinds are consistent with current market conditions.

[Robert Sanchez, Chairman & CEO at Ryder System]

We remain confident in the long term secular growth trends for all our businesses and in the value our solutions bring to our customers. We remain focused on our initiatives and are confident that our transformed business model is capable of performing across a range of business environments. Turning to Page fourteen. The key driver of expected earnings growth in 2025 is incremental benefits from multiyear strategic initiatives that are well underway and related to our contractual lease, dedicated and supply chain businesses. We have good visibility to these initiatives.

[Robert Sanchez, Chairman & CEO at Ryder System]

They represent structural changes we're making to the business and are not dependent on a cycle upturn. Upon completion, we expect these initiatives to generate annual pretax earnings benefits of approximately 150,000,000 which will be a key component to achieving our long term ROE target of low 20s over the cycle. In FMS, we expect to realize an incremental annual benefit of approximately $20,000,000 in 2025 from our lease pricing initiative. This results in a total $125,000,000 benefit relative to our 2018 run rate, reflecting portfolio pricing under the new model. We expect $50,000,000 in benefits from the multi year maintenance cost savings initiative announced in mid-twenty twenty four.

[Robert Sanchez, Chairman & CEO at Ryder System]

In DTS, we expect to realize 40,000,000 to $60,000,000 in annual synergies from the Cardinal acquisition at full implementation. The majority of these synergies are related to maintenance efficiencies and replacing third party operating leases with the benefits of rider ownership and asset management. 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. Since the second half of twenty twenty four, we have seen improved productivity in this vertical as a result of these actions and expect incremental benefits going forward. By 2025, we expect to realize benefits of approximately $100,000,000 from these collective initiatives.

[Robert Sanchez, Chairman & CEO at Ryder System]

Approximately $70,000,000 of these benefits are incremental to 2024. 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. As such, we expect an annual pretax earnings benefit of approximately $200,000,000 by the next cycle peak and expect to begin realizing these benefits after 2025. 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. We expect the majority of the 200,000,000 benefit to come from the cyclical recovery of rental and used vehicle sales in FMS.

[Robert Sanchez, Chairman & CEO at Ryder System]

In Dedicated, improved driver availability and lower recruiting and turnover costs are benefiting earnings but have been a headwind for sales and revenue growth. As freight capacity tightens 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. In supply chain, weaker volumes in our omni channel retail vertical have been a headwind to revenue and earnings. We expect supply chain results to benefit as volumes for these services recover and our optimized warehouse footprint is leveraged. We've been pleased by the business' 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.

[Robert Sanchez, Chairman & CEO at Ryder System]

Turning to Page 15. Our transformed business model continues to deliver value to our customers and shareholders. We continue to outperform prior cycles, and our results are benefiting from consistent execution and the strength of our contractual portfolio. We continue to see significant opportunity for profitable growth, supported by secular trends, our operational expertise and ongoing momentum from multiyear strategic initiatives. We remain committed to investing in products, capabilities and technologies that will deliver value to our customers and our shareholders.

[Robert Sanchez, Chairman & CEO at Ryder System]

That concludes our prepared remarks. Please note that we expect to file our 10 Q later today. At this time, I'll turn it over to the operator to open the call for questions.

[Operator]

Thank We'll go first to Jordan Alger with Goldman Sachs.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Yes. Hi, good morning. Just a couple of things. One, 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

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

in

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

the context of what are the puts and takes 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, the six I think they're six year deals, 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, a margin? Just get some clarity on that. Thank you.

[Robert Sanchez, Chairman & CEO at Ryder System]

Okay. Thanks, George. First, UBS, I guess, simple way to put it is, we're seeing in UBS is consistent with what we originally expected when we gave our forecast at the beginning of the year. We're seeing it was down, you saw that we reported it was down single digit sequentially, but a lot of that was really due to the fact we were selling some aged inventory. If you exclude that, we were actually up, specifically on tractors, which is really the area that I think we're most closely watching.

[Robert Sanchez, Chairman & CEO at Ryder System]

We expect to still be selling some aged inventory in Q2, but then as we get into the second half of the year, we expect that to move much more to retail. But we are seeing as we've been talking about the last several quarters, we've been seeing used truck pricing sort of bumping along the bottom, especially around tractors, trucks still coming down some more. I think with the drop in new tractor production for this year, the drop in the estimate, that should be beneficial for used trucks as you've got less supply coming into the market and therefore gives us a chance to finish working through, I would say, a market, finish working through the inventories that are out there. But let me hand it over to Tom so he can

[Robert Sanchez, Chairman & CEO at Ryder System]

give you a little bit more color.

[Tom Havens, President of Global Fleet Management Solutions at Ryder System]

I think Robert had most been and Christy mentioned it in her opening comments, but here in the first quarter we did do some wholesaling, 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 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 flattish. As you go through the different classes, We mentioned that sleeper pricing was actually up, which was a good sign.

[Tom Havens, President of Global Fleet Management Solutions at Ryder System]

Additionally, I'll just mention a couple comments about the inventory trends. Although the inventory is up year over year, the inventory is flipped from tractors to trucks, so tractor inventory is down quite a bit, almost 1,700 units, that's offset by the truck inventory 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. And the elevated truck inventory, historically, we've been able to work through that.

[Tom Havens, President of Global Fleet Management Solutions at Ryder System]

So we feel pretty good about those inventory trends and what that'll mean in the future as well. I'll try to answer your second question on how we price lease deals, but we target a basis point spread versus our WACC. And we look for a target that's between one hundred and one hundred and fifty bps spread from our WACC. And 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.

[Robert Sanchez, Chairman & CEO at Ryder System]

Yeah, and I think your comment your question was also about as the initiatives I guess the pricing initiative catches the tail. The other thing to remember is that Tom also has a maintenance optimization, maintenance cost initiative, which continuing him and his team are continuing to execute on. That'll still work through the next couple of years. And as you know, I would assume as those roll off, we'll look for another set of initiatives to go after. But yeah, the goal is to continue to target the 100 to 150 basis point spread while continuing to look for initiatives to improve returns over time.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Thank you.

[Robert Sanchez, Chairman & CEO at Ryder System]

Thank you, Jordan.

[Operator]

We'll go next to Christine McGarvey with Morgan Stanley.

[Christyne McGarvey, Vice President at Morgan Stanley]

Good morning. Thanks for taking my question. I think you guys did a really nice job sort of outlining the kind of upside potential here as Ryder really has transformed to a new company. But maybe as I think about giving some of the macro visibility being quite limited, it's obviously a much different company than we were anytime we had an outright consumer recession. So maybe you can talk a little bit about kind of that kind of scenario, what sort of macro assumptions are in the low end of the guide currently?

[Christyne McGarvey, Vice President at Morgan Stanley]

And if we do seem to talk ourselves into a recession here, what the earnings profile might look like?

[Robert Sanchez, Chairman & CEO at Ryder System]

Yeah, it's a great question, Christine. Listen, I think, first of all, outlook that we have is reflecting really a more muted economic environment, primarily due to all the market uncertainty that we're seeing. On the top end of the range, it's really driven by lower expected rental demand. We're just seeing rental softer in Q2, we're assuming that creates a new baseline going forward. Used vehicle sales, think is in line with our prior guidance, we're assuming that continues.

[Robert Sanchez, Chairman & CEO at Ryder System]

So it's really, 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. The low end of that range would assume further deterioration in the transactional businesses, really around our rental and used vehicle sales as we get into the second half of the year. But again, as you can see, even on the low end of the range, we're still expecting earnings growth year over year. And we feel really good about that. I think that's really, to your earlier point of how different Ryder is today versus where it's been at other times, a lot less dependent on the transactional rental and used truck market to hit our earnings numbers, and it shows the stability and resilience of the contractual business.

[Robert Sanchez, Chairman & CEO at Ryder System]

You look at our supply chain, earnings are up 35%, dedicated earnings are up 50%, Graham there's some acquisition in there. Even FMS lease margins are up also. So the contractual businesses, even in this uncertain period, continue to provide earnings growth. And again, not to forget all the initiatives that we're working, we're talking about $70,000,000 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.

[Robert Sanchez, Chairman & CEO at Ryder System]

The team executed really well in the first quarter and expect that to continue through the balance of the year.

[Christyne McGarvey, Vice President at Morgan Stanley]

Appreciate the color. Thank you.

[Robert Sanchez, Chairman & CEO at Ryder System]

Thank you.

[Operator]

We'll go next to Jeff Kaufman with Vertical Research Partners.

[Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners]

Thank you very much and good morning and congratulations in the tough environment. I want to ask maybe a question and a half here, if I could. In terms of some of the things you look at, so for instance, canary in the coal mine type stuff, rental fleet utilization, miles driven, accessorial charges, things like that. What what's the canary telling you, in terms of some of those early demand, early utilization cycles? And then just a follow-up on cash flow, if I can.

[Robert Sanchez, Chairman & CEO at Ryder System]

Okay. I'll let John give

[Robert Sanchez, Chairman & CEO at Ryder System]

you some color on the stuff we're seeing.

[John Diez, President & COO at Ryder System]

Yeah, Jeff, for us, the number one indicator has always been rental. And if you look at rental, 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 that's unique within that, though, is if you look at tractor class and that asset, that tractor class, especially around sleepers, we have seen some early signs as we finished the quarter and started second quarter of capacity

[John Diez, President & COO at Ryder System]

coming out of

[John Diez, President & COO at Ryder System]

the market and stabilization around over the road tractor activity. That is also supported, if you look at our lease miles on tractors, they're up year over year on a per unit basis, which supports that. And then when you look at our used vehicle sales activity, we talked about the wholesale activity that Tom mentioned, but if you extract that from those results, you're looking at year over year improvement or sequential improvements, I should say, in our tractor pricing on the used vehicle side. So, would say, look, overall I think it's a pretty muted environment, a wait and see environment by our customers, 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.

[Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners]

Okay, thank you. And thank you for the clarity on the used vehicle pricing differences because that didn't seem to match the markets either at first glance. Lastly, thank you for the updated cash flow guidance. And I was just kind of wondering, you talked a little bit about share buyback, you talked a little bit about dividend, not any real discussion on M and A and you're kind of anniversarying the M transactions of a year or two ago. I would think an uncertain environment and weaker demand might present an interesting opportunity on some of the M and A front.

[Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners]

Can you talk a little bit about what would be on the wish list in terms of potential opportunities there?

[Robert Sanchez, Chairman & CEO at Ryder System]

Yeah, you're right. It should be a good time to find if we find the right company. We're always in the market. We're looking for companies where we can maybe bring some new capabilities, new verticals, if you will, into supply chain. Anything that we could do around another type of Cardinal dedicated opportunity, would certainly be interested in.

[Robert Sanchez, Chairman & CEO at Ryder System]

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 riders. So we are out looking, we're going to pull the trigger when we find the right ones. That's really what, right now that's what we would hope for.

[Robert Sanchez, Chairman & CEO at Ryder System]

At some point we'll find another good one and we'll bring it in. But the good news is that our long term targets are generally not dependent on a whole lot of acquisitions. I mean, on the supply chain side, probably to close the gap on some of that double digit growth, wouldn't want something. But generally, the earnings and return profile are not completely dependent on acquisitions.

[Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners]

Okay, thank you very much.

[Robert Sanchez, Chairman & CEO at Ryder System]

Thanks, Jeff.

[Operator]

We'll go next to Scott Group with Wolfe Research.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Hey, thanks. Good morning. So I want to start on supply chain. Historically, there's a lot of auto exposure there. You talk a lot about now omni channel.

[Scott Group, MD & Senior Analyst at Wolfe Research]

I guess those end markets seem to be somewhat in the crosshairs of tariffs. 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?

[Robert Sanchez, Chairman & CEO at Ryder System]

Yes, I'll let Steve give you some more background on that. But I'll start by telling you, remember auto, the vast majority of the auto work we're doing are with U. S. Assembly plants. So we've actually seen relatively stable activity there with several customers really looking more closely at bringing more production into The U.

[Robert Sanchez, Chairman & CEO at Ryder System]

S, which would be I think a positive on that end. On the omnichannel, you've some crosscurrents. I'll let Steve give you a little bit of color on what we're seeing there.

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

Yes, Scott. As Robert said, if you think about our auto business, think we've got a real diverse set of OEMs that we support, primarily inbound manufacturing. So, and the majority of those cars are sold in The U. S. So we see kind of like very little impact there.

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

CPG, same thing, manufacturing here in The U. S. For U. S. Consumption.

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

So little to no impact there. I'd say that the area that we're watching right now is the omni channel piece, certainly from across our transactional business. Majority of those customers have options in countries that they produce in. So we're working closely with those customers. So I think that kind of gives you

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

a good summary of it.

[Robert Sanchez, Chairman & CEO at Ryder System]

Yes, the cross currents there are really around the ones that are shipping from China, you're seeing a slowdown there, but the ones that are shipping from other countries, we're seeing it maybe a pull forward or an acceleration there. So 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 at this point.

[Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners]

Okay, that's helpful. And then just a couple of things I just want to clarify. On the residual chart on slide 19, just any way to frame like how much more cushion you have on the bottom end of that chart? And then anything in a weaker Class eight market, are you seeing opportunities in terms of savings on new truck pricing or maybe not because of tariff, don't know. But any color would be helpful.

[Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners]

Thank you.

[Robert Sanchez, Chairman & CEO at Ryder System]

I'll Christy answer the question on the residuals.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Yeah. Hi, Scott. 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. So we still have room and our forecast, we talked about how tractor pricing is looking favorable sequentially. So we are expecting that to rise over the next couple of quarters here.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

So we're concerned over what's happening there.

[Robert Sanchez, Chairman & CEO at Ryder System]

And I guess to answer your question on new vehicle costs, new vehicle pricing, as you know, we buy directly from the OEs. In this environment, maybe a little bit of opportunity, but generally our pricing with them is relatively stable. I would also add that given the talk of tariffs, 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, the majority of the vehicles that we're purchasing are USMCA compliant. Say all the vehicles that we're purchasing are USMCA compliant.

[Robert Sanchez, Chairman & CEO at Ryder System]

Therefore, long as that agreement or some version of that agreement remains in place, 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. So that's generally what we're seeing around parts. We're seeing a small increase, but again, limited. Again, based on the parts that we buy and the place of origin of those parts.

[John Diez, President & COO at Ryder System]

Very helpful. Thank you, guys.

[Robert Sanchez, Chairman & CEO at Ryder System]

Thank you, Scott.

[Operator]

We'll go next to Daniel Imbro with Stephens Inc.

[Daniel Imbro, Managing Director at Stephens Inc]

Hey, guys. This is Reed C. On for Daniel. I kinda wanna stay on the subject of supply chain solutions. One of your bigger segments is the distribution management where you do a lot of warehousing.

[Daniel Imbro, Managing Director at Stephens Inc]

I think we've heard a lot more activity in this space recently. Are y'all seeing the same? And, if you could extrapolate kind of what you're seeing there into maybe some demand later in the truckload market? Just any takeaways there would be much appreciated.

[Robert Sanchez, Chairman & CEO at Ryder System]

All right. Let me hand that over to Steve.

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

Yeah, I think as you think about the warehousing side of the business, we've seen in the quarter, we've seen volumes increase in CPG and in omni channel, primarily our legacy retail business. So we haven't seen any decline there at that point. Demand, if you think about the pipeline right now, our pipeline is, I'd say relatively flat year over year and sequentially, still healthy and we're seeing those opportunities come through in the warehousing side.

[Daniel Imbro, Managing Director at Stephens Inc]

Thank you. And if I could just follow-up real quick on the dedicated side. We've heard from a lot of peers that this remains pretty competitive. If you could just provide some color on how pricing there is, maybe how the pipeline is shaping up and maybe any business wins that you've been able to pull off versus losses?

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

Yeah, I'd say kind of the same thing for the pipeline activity in Dedicated, relatively flat as you look at it. Decisions are still being delayed, now six to nine months in both portfolios. And as highlighted there in the end, we have seen some lost business primarily in our non specialized dedicated customer base where 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 reductions and network changes.

[Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation at Ryder System]

So we're helping in some situations where our customers are also optimizing their networks. Far as price, we're seeing price discipline on these deals and continue to see opportunities.

[Robert Sanchez, Chairman & CEO at Ryder System]

Yeah, I just add to that. Remember, the dedicated segment that we operate is a specialized dedicated. So I'd say, know, maybe what you hear from other companies is around the more traditional, you know, dry van dedicated where it could be more easily traded for truckload. So not that we don't have any of that because we have some of it, but I think the more specialized dedicated you may have got just a different pricing dynamic there.

[Daniel Imbro, Managing Director at Stephens Inc]

Got it. Thank you for the color guys.

[Robert Sanchez, Chairman & CEO at Ryder System]

Thank you.

[Operator]

We'll go next to Brian Ossenbeck with JPMorgan.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Hey, good morning. Thanks for taking the question. Just start with a quick follow-up. You mentioned I think Chris, you mentioned the 5% decline to get to the low end of that residual range. I guess, can you walk us through what would happen if that, say, happen next quarter?

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

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 biggest implications and sort of next steps if we do see another leg down there?

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

Yeah, hey Brian. So no, I mean, we are monitoring it closely. 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 aged inventory, which we're expecting to continue through the second quarter. And from then forward, we are expecting pricing to come back up just based on market trends that we're seeing based on what we saw excluding this aged inventory as well as inputs that we get from other third parties that are seeing similar trends. But putting that aside, we do look at it, I mean, there were to be a decline in the near future down to that 5%, Anything that's sitting at our used truck centers would have an incremental charge associated with it.

[Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer at Ryder System]

However, in our guidance 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 anything that could happen. But again, what we're seeing is more positive, and we don't think that any of it would be sustained at this level. And that's really the key. We make sure that it's just a current phenomenon and that's something that may extend over a long period of time.

[Robert Sanchez, Chairman & CEO at Ryder System]

Yeah, I mean, a reminder, you can see it on the chart, bottom end is at the low end of where the market has gone only twice in the last twenty 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, especially for sleepers, but even on the day caps going on, a retail to retail base is generally flat. I think that's a pretty good indicator of where things are.

[Robert Sanchez, Chairman & CEO at Ryder System]

But again, we think we're well positioned for that.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Okay, got it. And then just another question on just the EPA standards, excuse me, on 2027 and some of the other ones more broadly. I know you said it's not necessarily a material impact for Ryder, but we are hearing signs that people are cutting CapEx rather not really doing much of a pre buyer, at least putting that on hold. Are you hearing and seeing something similar? And 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?

[Robert Sanchez, Chairman & CEO at Ryder System]

Yes. 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. What we would do is we would have an opportunity to sign more leases, that obviously would then over a period of time come in. So not a big impact in the near term either way.

[Robert Sanchez, Chairman & CEO at Ryder System]

I think in the long term we had talked about a pre buy might create some uplift on used 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, that'd be nice if it happens, but it's not anything we're counting on. It's not anything that we put in our pricing for leases. It's not anything that we've contemplated as we've laid out our long term targets for our business, our ROE or any of our earnings targets. So just want to make sure I'm clear on that.

[Robert Sanchez, Chairman & CEO at Ryder System]

It would be gravy, I guess, if it happened longer term for used truck sales.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Okay. Appreciate that context. Thank you.

[Operator]

We'll go next to Harrison Bauer with Susquehanna.

[Harrison Bauer, Equity Research Associate at Susquehanna]

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 that the commercial rental segment was a big driver of the top end of that range declining. Is that the whole of the $0.35 decline on the top end of the range?

[Robert Sanchez, Chairman & CEO at Ryder System]

Yes, that's a good way to look at it. Basically, if you think about that waterfall, upside that we had on rentals, we're basically taking that away.

[Robert Sanchez, Chairman & CEO at Ryder System]

Okay, thanks for

[Robert Sanchez, Chairman & CEO at Ryder System]

that clarification. The remaining contractual earnings expectations in that waterfall remain intact.

[Harrison Bauer, Equity Research Associate at Susquehanna]

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 tailwinds you might see to that sort of entering 2026? Thank you.

[Robert Sanchez, Chairman & CEO at Ryder System]

Yes, I think as the new truck pricing has gone up, that creates lift for used truck pricing. And I think the used truck pricing, again, you can see on that chart, we've been seeing that pricing come back down, getting down to kind of trough levels. Typically in the marketplace, once you get to those levels, see companies sellers, if you will, start to look for ways of getting that pricing back up. So we're beginning to see that, I think as the inventory of used equipment really starts to come down, that's where you start to see now more pricing. And again, we started seeing it 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.

[Robert Sanchez, Chairman & CEO at Ryder System]

So that's a really good sign and something that we, again, we're sitting here in April, we're continuing to see that trend. I should probably point out that we actually raised prices on sleeper tractors for the first time in the last couple of years, this last month.

[Harrison Bauer, Equity Research Associate at Susquehanna]

Great, thank you.

[Robert Sanchez, Chairman & CEO at Ryder System]

Thank you.

[Operator]

At this time, there are no additional questions. I'd like to turn the call back over to Mr. Robert Sanchez for closing remarks.

[Robert Sanchez, Chairman & CEO at Ryder System]

Okay. Well, thank you all for your interest in Ryder and look forward to speaking with you as soon as we get out into some of the conferences. Thank you.

[Operator]

That concludes today's conference. Thank you all for your participation.

Participants

Executives

• Calene Candela, VP - Investor Relations
• Robert Sanchez, Chairman & CEO
• Cristina Gallo-Aquino, Executive VP, CFO & Principal Accounting Officer
• John Diez, President & COO
• Tom Havens, President of Global Fleet Management Solutions
• Steve Sensing, President of Global Supply Chain Solutions and Dedicated Transportation

Analysts

• Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs
• Christyne McGarvey, Vice President at Morgan Stanley
• Jeffrey Kauffman, Partner & Transportation and Logistics Equity Research at Vertical Research Partners
• Scott Group, MD & Senior Analyst at Wolfe Research
• Daniel Imbro, Managing Director at Stephens Inc
• Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan
• Harrison Bauer, Equity Research Associate at Susquehanna