Yahoo Finance Ryder System Inc (R) (Q1 2024) Earnings Call Transcript Highlights: Navigating Market Dynamics ...
Operating Revenue: $2.5 billion in Q1, up 6% year-over-year.
Comparable EPS: $2.14 in Q1, down from $2.81 in the previous year.
Return on Equity: 17% for the trailing 12-month period, in line with long-term target.
Free Cash Flow: Negative $175 million to $275 million for full year 2024 forecast, an improvement from previous forecast of negative $275 million to $375 million.
Net Capital Expenditures: Expected to be approximately $2.7 billion for full year 2024.
Operating Cash Flow: Forecast unchanged at $2.4 billion for full year 2024.
2024 Full Year Forecast: Comparable EPS raised to $11.75 to $12.50, ROE forecast increased to 15.5% to 16.5%.
Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide an update on the recovery in the used truck and rental markets? A: Robert E. Sanchez, Chairman & CEO of Ryder System, Inc., noted that the downturn in the rental and used truck markets has been prolonged, lasting almost two years. He mentioned that spot rates are stabilizing, and Class 8 production has decreased, suggesting an impending balance between freight and available vehicles. Sequentially, used truck pricing declined by 3-4% from Q4 to Q1, showing signs of potential stabilization. However, rental demand was weaker than expected, leading to adjusted forecasts for a modest recovery in the second half of the year.
Q: Are you still assuming a recovery in used vehicle prices in the latter half of the year? A: Robert E. Sanchez explained that the forecast for the remainder of the year includes hitting the bottom in Q2 and Q3, with a potential uptick in Q4. He clarified that the first quarter's performance exceeded expectations, but this has not altered the full-year expectations significantly. If the anticipated recovery does not materialize, results might align with the lower end of their guidance range.
Q: How is the leasing fleet expected to grow, and what are the impacts of fleet composition changes on revenue per unit (RPU)? A: Sanchez indicated that the leasing fleet, including the addition from the Cardinal acquisition, is expected to grow organically by about 2,000 to 3,000 units, reaching around 150,000 units. He noted that the shift to more straight trucks versus tractors is more pronounced in the rental fleet than in the leasing fleet, which helps maintain stable RPU in leasing despite the changes.
Q: Can you discuss the trends in maintenance costs and whether they are more structural or cyclical? A: Sanchez highlighted that the improvements in maintenance costs are largely structural, resulting from multi-year initiatives aimed at reducing costs. These initiatives are performing better than expected, and some cost reductions are also being driven by less inflation in certain cost areas.
Q: How is Ryder managing the current economic uncertainties in its Supply Chain and Dedicated segments? A: Steve W. Martin, EVP of Dedicated Transportation Solution, mentioned that the pipeline of activity in both segments has been relatively flat year-over-year, with continued delays in customer decisions due to economic uncertainties. In Dedicated, there has been a slight increase in the pipeline due to marketing initiatives and the Cardinal acquisition, but overall, customers are delaying decisions and opting for price over service.
Q: What is the expected impact of the upcoming pre-buy activity related to the 2027 EPA engine technology changes? A: Sanchez anticipates benefits across multiple areas from the pre-buy activity expected to start in late 2025. This includes increased leasing as companies decide to replace fleets, higher demand and pricing stability in the rental market, and elevated used vehicle prices for pre-2027 models. He recalled similar trends from the 2006 pre-buy activity, which significantly boosted Ryder's performance across several business segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
