Ryder Posts Earnings Loss, Record Revenue in Q4


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Ryder System Inc. reported record fourth-quarter revenue and a loss in earnings due to previously announced expenses.

The Miami-based leasing and rental firm posted a net loss of $53.5 million, or a loss of 1.02 cents per diluted share, during the three months ending Dec. 31. That compared with a gain of $112 million, or 2.12 cents a diluted share, during the year-ago period. Revenue hit a record by increasing by 0.7% to $2.27 billion from $2.26 billion.

Ryder explained in the report that the earnings loss primarily reflected the impact of the previously announced $118 million depreciation expense resulting from the vehicle residual value estimate change that was effective July 1. The company also had to contend with customer labor strikes earlier in the year.

The fourth-quarter results were about in line with Wall Street analysts, which had been looking for 3 cents per share and quarterly revenue of $2.26 billion, according to Zacks Consensus Estimate.

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For the full year, Ryder reported a net income loss of $24.4 million, or a loss of 47 cents a share, on revenue of $8.9 billion in 2019. That compared with net income of $285 million, or $5.38 a share, on revenue of $8.4 billion in 2018.

Ryder CEO Robert Sanchez discussed measures the company has taken to support its strategy of moderate growth with improved returns. He highlighted what has been done, along with ongoing and future efforts.

“We continue to evaluate underperforming accounts and implement appropriate rate increases at the time of renewal,” Sanchez said during a conference call. “We expect this will result in some higher levels of lost business and have factored those into our forecast. [Because of] the favorable results in 2019 from our multiyear maintenance-cost initiative, we are increasing our expected annual savings from $75 [million] to $100 million.

The ChoiceLease program also will see price increases to raise returns in response to the volatility of the used truck market. Sanchez suspects the higher pricing is likely to reduce new sales from recent record levels but believes it is an appropriate trade-off to enhance returns.

“During the fourth quarter, we closed a number of underperforming locations in the U.S. and Canada,” Sanchez said. “With higher expected used-vehicle sale volumes in 2020, we took action to increase retail sales capacity by adding sales locations. Locations leveraging our inside sales capabilities and enhancing our used vehicles website.”

Ryder also will discontinue its liability insurance extension program for leased vehicles to reduce future exposure from escalating insurance premiums and settlement costs. Insurance costs in the trucking industry have greatly increased in recent years.

“In order to accelerate growth in supply chain and dedicated, we’ve made strategic investments in sales and marketing resources,” Sanchez said. “Taken together, these strategic initiatives create short-term earnings headwinds in 2020 but are expected to better prepare us to deliver improved returns in 2021 and beyond.”

Ryder also noted that income was impacted by lower rental earnings, higher insurance-related costs and increased expenses related to a higher number of vehicles being prepared for sale. Breaking down results by division gives a clearer picture of what happened in the fourth quarter.

The SCS business segment saw total revenue was down 3% to $649 million. The SCS total revenue decline primarily reflects previously announced lost business and customer labor strikes, which partially were offset by higher pricing. SCS earnings before tax were $32 million, which reflects an increase of 3.3% in the fourth quarter.

Ryder Supply Chain Solutions ranks No. 11 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. It also ranks No. 6 on the Transport Topics Top 50 list of the largest logistics companies in North America.

The Fleet Management Solutions business segment saw total revenue of $1.4 billion, which is up 4% from the same period last year. Ryder ChoiceLease revenue increased by 9%, which reflects a larger average fleet size and higher prices on new vehicles. FMS earnings reflect the depreciation expense with a loss before tax of $80 million.

The Dedicated Transportation Solutions business segment saw total revenue was down 5% to $346 million. That decline reflects lower subcontracted transportation revenue and lower fuel costs passed through to customers. DTS earnings before tax were $18 million, which reflects an increase of 14.6%.

Stephanie Benjamin, an analyst for SunTrust Robinson Humphrey, expected the company stock to be down but is optimistic over some changes announced with this latest earnings report. She also states the higher investments should drive meaningful earnings growth in 2021.

“We had hoped the company cleared the decks in Q3 after significantly lowering [earnings per share] expectations following its residual value changes,” Benjamin said in an investment report provided to Transport Topics. “That said, we believe the changes announced today are positioning the company for less volatility with an improved return profile and positive [free cash flow] generation, both of which were key areas of focus for investors.”

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