Ryder System, Inc. (NYSE:R), a leading provider of commercial transportation and supply chain management solutions, reported its second-quarter 2024 financial results, showcasing the resilience of its transformed business model. The company's performance exceeded expectations, driven by strong execution across its diversified portfolio of services.

Financial Highlights

For the second quarter of 2024, Ryder reported total revenue of $3.182 billion, up 10% year-over-year. This increase was primarily driven by recent acquisitions and higher operating revenue, which grew 10% to $2.561 billion. The company's net income for the quarter was $127 million, or $2.84 per diluted share, a significant improvement from the loss of $0.39 per share reported in the same period last year.

On a non-GAAP basis, Ryder's comparable earnings per share (EPS) from continuing operations was $3.00, down from $3.61 in the prior-year quarter. This decline was largely attributable to weaker market conditions in used vehicle sales and rental, partially offset by higher contractual earnings. The company's return on equity (ROE) for the quarter was 16%, reflecting the strength of its transformed business model.

Year-to-date, Ryder generated $71 million in free cash flow, a significant increase from $16 million in the prior-year period, primarily due to lower capital expenditures, partially offset by higher working capital needs related to recent acquisitions and lower proceeds from the sale of used vehicles and properties.

Segment Performance

Fleet Management Solutions (FMS)

FMS segment revenue increased 1% year-over-year to $1.478 billion, driven by higher operating revenue, which grew 2% to $1.276 billion. This was primarily due to a 10% increase in ChoiceLease revenue, partially offset by lower rental demand. FMS pretax earnings were $133 million, down from $180 million in the prior-year quarter, reflecting lower used vehicle pricing and weaker rental demand.

Supply Chain Solutions (SCS)

SCS segment revenue increased 14% year-over-year to $1.341 billion, driven by recent acquisitions and organic growth across all industry verticals. Operating revenue grew 14% to $989 million. SCS pretax earnings increased by $9 million to $85 million, primarily reflecting stronger automotive performance.

Dedicated Transportation Solutions (DTS)

DTS segment revenue increased 44% year-over-year to $635 million, and operating revenue grew 48% to $485 million, primarily due to the acquisition of Cardinal Logistics. DTS pretax earnings increased from $33 million to $37 million, reflecting improved operating performance, partially offset by acquisition integration and other related costs.

Business Overview

Ryder delivered solid second-quarter results and continued to outperform prior cycles. Comparable EPS were above forecast primarily reflecting better-than-expected ChoiceLease results. ROE of 16% demonstrated the increased resilience of the transformed business model and is in line with expectations for the latter stage of a freight-cycle downturn.

Outlook

The company is updating its full-year 2024 comparable EPS guidance to a range of $11.90 to $12.40, compared to the prior range of $11.75 to $12.50. The high end of the updated range assumes a gradual recovery in rental and used vehicle sales, while the low end reflects ongoing weak conditions in these areas. Ryder's 2024 ROE is now expected to be in the 16% to 16.5% range.

Ryder is also providing a third-quarter 2024 comparable EPS forecast of $3.30 to $3.50, compared to $3.58 in the prior-year period. The company remains confident in the long-term secular growth trends across its business segments and believes its transformed, diversified model will continue to drive outperformance relative to prior cycles.

Liquidity

As of June 30, 2024, Ryder had cash and cash equivalents of $164 million and total debt of $7.536 billion. The company's balance sheet leverage, as measured by the debt-to-equity ratio, was 245% at the end of the quarter, below its target range of 250% to 300%.

Ryder's capital allocation priorities remain focused on supporting its strategy for long-term profitable growth and returning capital to shareholders. The company recently increased its quarterly dividend by 14% to $0.81 per share and has returned $207 million to shareholders year-to-date through share repurchases and dividends.

Looking ahead, Ryder expects its full-year 2024 free cash flow to be in the range of $150 million to $250 million, an increase from its prior forecast, primarily due to lower expected lease capital spending.

Risks and Challenges

Ryder operates in a highly competitive industry, and its performance is subject to various macroeconomic and industry-specific risks. These include changes in general economic conditions, volatility in freight demand, competition from other service providers, and fluctuations in used vehicle pricing and rental demand.

The company also faces risks related to supply chain disruptions, labor shortages, and regulatory changes, which could impact its ability to deliver services and maintain its cost structure. Ryder's ability to successfully integrate recent acquisitions, such as Cardinal Logistics, and realize anticipated synergies is also crucial to its future performance.

Conclusion

Ryder's solid second-quarter results and raised full-year guidance demonstrate the resilience of its transformed business model. The company's diversified portfolio of services, focus on enhancing returns, and strategic initiatives position it well to navigate the current freight cycle downturn and capitalize on the eventual upturn. Ryder's commitment to shareholder returns, strong liquidity, and disciplined capital allocation further reinforce its status as a leading player in the commercial transportation and supply chain management industry.