Ryder System (R) Stephens 26th Annual Investment Conference | NASH2024 summary

Business overview and transformation

• Operates three main segments: fleet management (leasing/rental), supply chain, and dedicated transportation, with a shift toward asset-light businesses over the past five years.

• Supply chain and dedicated now comprise 60% of the business, up from 44% in 2018, reflecting a strategic transformation.

• Transformation initiatives included de-risking the lease portfolio, expanding margins, and reducing maintenance costs by over $100 million annually.

• Despite a freight recession, expects $12 EPS in 2024, double the 2018 peak cycle EPS.

• Long-term business mix is expected to remain around 60% supply chain/dedicated and 40% fleet management.

Market drivers and macro trends

• Outsourcing remains underpenetrated: less than 5% in dedicated, under 20% in supply chain, and about 25% in equipment leasing.

• Labor shortages, rising vehicle costs due to 2027 engine regulations, and dynamic supply chains are key outsourcing catalysts.

• 2027 Low-NOx rules are expected to proceed regardless of administration, while 2030 rules may be impacted by policy changes.

• Economic optimism for 2025, with potential benefits from manufacturing-promoting policies and possible $100–$200 million in cash tax savings if 2017 tax reforms are extended.

• Tariffs and inflation remain concerns for consumer demand.

Segment performance and outlook

• Food and beverage accounts for 20% of revenue, with short-term volume pressure from inflation but expected recovery as consumer conditions improve.

• Automotive is about 13% of mix, with strong contractual protection and resilience; long-term growth expected as domestic manufacturing accelerates.

• Fleet management transformation included lowering residual values, reducing maintenance spend, and improving returns from 13% to 19% ROE.

• $50 million in new maintenance savings targeted by 2026, with early benefits expected in Q4 2024 and 2025.

• Used tractor prices have a 15% buffer before hitting zero gains; market cycle suggests nearing a bottom with expected improvement in 2025.