Ryder System posted higher earnings and strong sales growth in its dedicated and supply chain solutions businesses for the first quarter of 2019.
The Miami-based truck leasing and rental firm also raised its full-year profit forecast with the expectation that business will continue to grow in response to favorable economic conditions and that shippers will continue to outsource more of their transportation and logistics services.
Overall, Ryder reported net income of $45.3 million, or 86 cents a share, in the three months ended March 31, compared with $36.9 million, or 70 cents a share, in the same period a year ago. Total revenue climbed 15% to a record $2.18 billion from $1.9 billion.
“This growth reflects continued outsourcing trends and the impact of our sales and marketing initiatives,” CEO Robert Sanchez said in a news release issued April 30. “We outperformed our forecast, primarily due to better than anticipated impact of the new lease accounting standard and to a lesser extent stronger performance in ChoiceLease and dedicated.”
New industrywide accounting standards for leases took effect Jan. 1, requiring companies such as Ryder to change the timing of lease revenue and related expenses to better align with maintenance costs, according to an explanation provided by Ryder. The change increased earnings by 11 cents a share in the first quarter of 2019 and 6 cents a share in the first quarter of 2018.
For the full year, however, Ryder expects adoption of the new accounting standard to reduce earnings by approximately 15 cents a share as the company reduces the average age of the vehicles in its fleet.
Breaking down results by division, Ryder’s Fleet Management Solutions reported operating profits of $60.9 million in the first quarter of 2019, compared with $54.3 million in the same period a year ago. Revenue increased 9% to $1.35 billion from $1.24 billion.
Ryder’s Dedicated Transportation Solutions business posted operating profits of $17.4 million in the quarter, compared with $13.1 million a year ago. Revenue grew 17% to $350 million from $236 million.
Ryder Supply Chain Solutions reported operating profits of $32.3 million in the quarter, compared with $25.5 million a year ago. Gross revenue climbed 28% to $636 million from $495 million and net revenue, which excludes fuel and subcontracted transportation, increased 25% to $477 million from $383 million.
Revenue growth in this business reflects the acquisition of home delivery specialist MXD Group, which was rebranded as Ryder Last Mile, in the second quarter of 2018.
Ryder said it expects earnings for the full year to be in the range of $5.28 to $5.58 a share, compared with prior forecasts of between $5.18 to $5.48 a share.
“We continue to see a healthy economic environment, and customers remain confident in making long-term contractual commitments,” Sanchez said. “In addition, demand for rental and used vehicles remains favorable.”
Ryder System ended the quarter with 153,500 leased vehicles, a gain of 9% from 140,800 a year ago, plus 43,800 rental trucks, an increase of 11% from 39,300 a year ago, and 55,900 vehicles under maintenance contracts, a gain of 3% from 54,500 a year ago.
The company’s dedicated fleet grew 11% in the first quarter to 9,700 vehicles from 8,700 a year ago. And the number of vehicles in the Supply Chain Solutions business increased 17% to 9,800 from 8,400.