Executive Summary / Key Takeaways

• Ryder System, Inc. ($R) has fundamentally transformed its business model since 2018, shifting towards asset-light Supply Chain Solutions (SCS) and Dedicated Transportation Solutions (DTS) to enhance resilience and improve full-cycle returns, demonstrating significantly higher earnings and returns even during the current prolonged freight market downturn.
• The company's strategic initiatives, including lease pricing, maintenance cost savings, and Cardinal Logistics acquisition synergies, are expected to generate $150 million in annual pretax earnings benefits upon completion, with $100 million anticipated by year-end 2025, driving year-over-year earnings growth independent of a market upturn.
• Ryder leverages proprietary technologies like RyderShare and RyderShip, along with Agentic AI, to differentiate its offerings, optimize operations, and enhance customer value, particularly in SCS, which is experiencing robust sales pipeline activity.
• Despite near-term headwinds in transactional businesses (commercial rental and used vehicle sales) and some contractual sales delays, Ryder forecasts 2025 comparable EPS of $12.85 to $13.05 and a Return on Equity (ROE) of 17%, supported by strong operating cash flow and an annual $200 million cash tax benefit from reinstated bonus depreciation.
• Ryder maintains a strong balance sheet with ample capital deployment capacity, enabling continued shareholder returns through dividends and share repurchases, while positioning the company for an additional $200 million in pretax earnings benefits from an eventual freight cycle recovery.

The Transformed Core: Resilience in a Challenging Market

Ryder System, Inc., founded in 1933, has evolved into a global logistics and transportation powerhouse, operating across Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS). Historically, Ryder's revenue was heavily weighted towards FMS, as evidenced by its 2018 profile where FMS dominated an $8.4 billion revenue base, yielding comparable earnings per share (EPS) of $5.95 and a 13% Return on Equity (ROE). However, recognizing the cyclicality inherent in its traditional model, Ryder embarked on a "balanced growth strategy" post-2018. This strategic pivot aimed to de-risk the business, elevate its return profile, and accelerate growth in the more asset-light SCS and DTS segments. This transformation is profound, with SCS and DTS projected to account for 60% of Ryder's total revenue by 2025, a significant increase from 44% in 2018.

A cornerstone of Ryder's strategic differentiation lies in its technological prowess. The company has invested heavily in customer-centric innovation, deploying proprietary platforms like RyderShare and RyderShip. RyderShare provides real-time visibility and collaboration across the supply chain, offering customers unparalleled transparency and control over their logistics operations. RyderShip, on the other hand, streamlines freight management. These technologies are not merely incremental improvements; they are fundamental differentiators that enhance Ryder's value proposition, driving sales activity and enabling large customers to reshape their supply chains more effectively. Furthermore, Ryder is actively deploying Agentic AI technologies within its transportation management and brokerage services. This integration aims to optimize freight rates, improve service levels, and enhance the efficiency of freight bill auditing and payment processes. These technological advancements contribute directly to Ryder's competitive moat, fostering operational efficiencies, potentially leading to better capital efficiency, and strengthening customer retention by addressing complex logistical challenges.

Strategic Initiatives and Operational Excellence

Ryder's strategic transformation is underpinned by a series of multi-year initiatives designed to structurally enhance earnings, irrespective of market cycles. These initiatives are expected to generate approximately $150 million in annual pretax earnings benefits upon full completion. By the end of 2025, Ryder anticipates realizing about $100 million from these collective efforts, with approximately $70 million being incremental to 2024's performance.

In the FMS segment, a lease pricing initiative is on track to deliver an incremental annual benefit of approximately $20 million in 2025, contributing to a total benefit of $125 million relative to the 2018 baseline. Complementing this is a maintenance cost savings initiative, announced in mid-2024, which is projected to yield $50 million in benefits over multiple years. For DTS, the acquisition of Cardinal Logistics on February 1, 2024, is a significant driver, expected to generate $40 million to $60 million in annual synergies. These synergies primarily stem from maintenance efficiencies and the strategic conversion of third-party operating leases to Ryder's own asset management. The SCS segment is focused on optimizing its omnichannel retail warehouse network through continuous improvement, aiming for operational efficiencies and better alignment with demand. While the third quarter of 2025 saw some incremental costs related to this optimization and unfavorable e-commerce network performance, management expects continued progress and incremental benefits in 2026.

Financial Performance and Capital Strength

Ryder's financial performance in 2025 reflects the resilience of its transformed model amidst a challenging macroeconomic backdrop. For the nine months ended September 30, 2025, total revenue stood at $9.49 billion, a slight increase from $9.45 billion in the prior year period. Operating revenue, a non-GAAP measure excluding fuel and subcontracted transportation, increased by 2% for the nine months ended September 30, 2025, reaching $7.78 billion. This growth was primarily driven by contractual revenue in SCS and FMS.

Consolidated earnings from continuing operations before income taxes (EBT) for the nine months ended September 30, 2025, were $508 million, up from $480 million in the prior year. Diluted earnings per common share from continuing operations for the same period increased to $8.75 from $7.96. This growth was largely attributable to higher contractual earnings and the benefits derived from strategic initiatives, partially offset by weaker market conditions in rental and used vehicle sales. Ryder's adjusted Return on Equity (ROE) for the trailing 12-month period was 17%, a testament to the business's ability to generate strong returns even during a freight cycle downturn.

Cash flow generation remains a significant strength. Net cash provided by operating activities from continuing operations was $1.85 billion for the nine months ended September 30, 2025, compared to $1.71 billion in the prior year, primarily due to lower income tax payments. Free cash flow surged to $496 million for the nine months ended September 30, 2025, from $218 million in 2024, driven by reduced capital expenditures and higher operating cash flow.

The company's 2025 free cash flow forecast is $900 million to $1 billion, which includes an annual cash flow benefit of approximately $200 million from the permanent reinstatement of tax bonus depreciation.

Ryder maintains a robust balance sheet, with a debt-to-equity ratio of 254% as of September 30, 2025, positioning it at the lower end of its target range of 2.5 to 3 times. This strong financial position provides ample capacity for capital deployment. Over a three-year period, Ryder anticipates generating approximately $10.5 billion from operating cash flow and used vehicle sales proceeds, creating an incremental $3.5 billion in debt capacity, totaling $14 billion available for capital deployment. The company has also demonstrated a strong commitment to shareholder returns, repurchasing approximately 2.2 million shares and paying $457 million in dividends in 2025. Since 2021, Ryder has repurchased about 22% of its outstanding shares and increased its quarterly dividend by 57%.

Competitive Landscape and Strategic Positioning

Ryder operates in a competitive landscape with both direct and indirect rivals. Direct competitors include established logistics and transportation providers such as XPO Logistics (XPO), C.H. Robinson Worldwide (CHRW), J.B. Hunt Transport Services (JBHT), and Schneider National (SNDR). Ryder's competitive advantage is rooted in its integrated, customer-centric approach, extensive network, and asset management expertise.

In Fleet Management Solutions, Ryder's full-service leasing and maintenance offerings, particularly ChoiceLease, provide a comprehensive solution that differentiates it from competitors who may focus more narrowly on transactional services. Ryder's extensive network of retail sales centers for used vehicles also provides a unique value proposition in asset management and resale. While competitors like XPO Logistics excel in technological agility and rapid scalability in dynamic markets, Ryder's focus on long-term contractual relationships and operational reliability often translates into greater customer loyalty and recurring revenue. However, Ryder may face challenges in matching the speed of innovation from purely digital-focused competitors.

In Supply Chain Solutions, Ryder's hands-on approach to facilities management and just-in-time replenishment offers tailored solutions for complex client needs, contrasting with C.H. Robinson's asset-light brokerage model. While CHRW's model might offer greater flexibility and potentially lower operating costs, Ryder's integrated services aim for deeper customer relationships and operational control. Ryder's investments in technologies like RyderShare and Agentic AI are crucial for maintaining competitiveness against digitally advanced rivals.

Ryder's Dedicated Transportation Solutions segment directly competes with J.B. Hunt's dedicated services. Ryder's comprehensive support, including routing, safety, and administrative management, provides a more holistic solution compared to JBHT's specialized intermodal focus. While JBHT may offer faster transit times for specific intermodal routes, Ryder's integrated fleet solutions aim for stronger customer retention and overall efficiency. Schneider National, another competitor, also focuses on dedicated transportation. Ryder's flexible maintenance and leasing options offer comprehensive support, while SNDR's strengths in dedicated trucking emphasize reliability in high-volume routes.

Ryder's competitive advantages, or "moats," include strong brand recognition, its extensive network, and proprietary fleet management systems. These assets contribute to enhanced customer loyalty, recurring revenue, and superior margins through long-term contracts. The integrated maintenance and tracking capabilities of its systems lead to higher operational efficiency and better capital utilization. These advantages help Ryder counter the technological focus of some competitors by offering a reliable network that fosters strong customer retention.

However, Ryder is not without vulnerabilities. Potential dependencies on fuel costs and a less agile technological infrastructure compared to some pure-play tech logistics firms could impact financial performance by increasing operational costs and slowing market adaptation. Barriers to entry in the logistics industry, such as high capital requirements and regulatory complexities, generally favor established players like Ryder, limiting new entrants and supporting the company's long-term financial stability.

Outlook and Risks

Ryder's outlook for 2025 anticipates continued earnings growth, driven by its transformed business model and strategic initiatives, even as freight market conditions are expected to remain muted. The company forecasts full-year 2025 comparable EPS in the range of $12.85 to $13.05, an increase from $12 in the prior year. The ROE is projected to be 17%, consistent with expectations during a freight cycle downturn. For the fourth quarter of 2025, comparable EPS is expected to be between $3.50 and $3.70.

Management's guidance assumes a "muted growth environment" and that freight market conditions will remain "at or near trough levels" for the remainder of the year. A very modest improvement in rental demand is anticipated later in the year, with rental utilization improving modestly on a smaller fleet. Used vehicle sales are expected to be in line with 2024 levels and above residual value estimates, with a "muted second-half recovery". Notably, U.S. Class 8 production is now expected to be down 20% in 2025, a significant revision from an initial forecast of a 1% increase.

While the sales pipelines remain strong, the prolonged freight downturn and economic uncertainty continue to cause some customers in the Lease and Dedicated segments to delay decisions. However, Ryder is encouraged by robust sales and pipeline activity in SCS, with new contracts expected to contribute to revenue and earnings starting in the second or third quarter of 2026. The company also expects an annual pretax earnings benefit of at least $200 million by the next cycle peak, primarily from the cyclical recovery of FMS rental and used vehicle sales.

Key risks include the potential for a more prolonged freight downturn, continued economic uncertainty, and inflationary cost pressures. Regulatory changes, such as new CDL regulations, could tighten the driver market, which, while potentially beneficial for Ryder's dedicated business in the long run, introduces near-term uncertainty. The potential for truck tariffs also presents a risk, though Ryder expects to pass through any price increases in its lease rates and believes existing used equipment could become more valuable. Management has stated that pricing would need to decline 8% from current levels (Q3 2025) to hit the bottom end of residual value estimates, but they are not anticipating such a decline or planning any residual assumption changes.

Conclusion

Ryder System, Inc. has successfully executed a transformative strategy, shifting its business mix towards resilient, asset-light contractual services and leveraging technological innovation to drive consistent earnings growth. This strategic pivot has enabled Ryder to outperform prior cycles, delivering significantly higher earnings and returns even during a prolonged freight market downturn. The company's robust financial health, characterized by strong operating cash flow, ample capital deployment capacity, and a commitment to shareholder returns, provides a solid foundation for future growth.

While near-term market headwinds persist in transactional segments and some contractual sales decisions are delayed, Ryder's strategic initiatives and technological differentiators position it for continued outperformance. The company's focus on operational excellence, coupled with its ability to adapt to evolving industry dynamics and capitalize on secular outsourcing trends, underpins a compelling investment thesis. As the freight market eventually recovers, Ryder's transformed model is poised to unlock substantial additional earnings, further solidifying its position as a leader in integrated logistics and transportation solutions.