Ryder System at Wells Fargo Conference: Strategic Shift and Future Plans

On Wednesday, 11 June 2025, Ryder System Inc. (NYSE:R) presented at the Wells Fargo Industrials & Materials Conference 2025, detailing its strategic transformation towards asset-light businesses amidst a challenging freight market. Despite economic uncertainties, Ryder outlined plans for growth and capital deployment, while acknowledging current market challenges.

Key Takeaways

• Ryder’s shift to asset-light businesses, like Supply Chain and Dedicated Transportation, now comprises 60% of revenue.
• Projected EPS for the year is set between $12.85 and $13.60, nearly double from 2018.
• The company plans $13.5 billion in capital deployment over three years, focusing on fleet replacement and growth.
• Ryder aims for $150 million in earnings improvement through strategic initiatives.
• Resilience shown in contractual businesses despite a prolonged freight recession.

Financial Results

Ryder has seen a substantial shift in its revenue composition, with Supply Chain and Dedicated Transportation now accounting for 60% of its revenues, up from 45% in 2018. This strategic pivot has led to a projected EPS of $12.85 to $13.60 for the year, nearly doubling the EPS of under $6 in 2018. The company expects its return on equity (ROE) to be between 16.5% and 17.5% this year, with aspirations to reach the low 20s over the cycle.

Operational Updates

Ryder is executing strategic initiatives to bolster its financial performance. These include repricing leases with lower residuals and higher spreads, anticipated to contribute $20-$25 million in earnings. Maintenance cost reductions are expected to save $50 million, while synergies from the Cardinal acquisition are projected to add $40-$60 million. The company has already identified $150 million in earnings improvements, with $100 million expected by year-end.

Future Outlook

Looking forward, Ryder plans to deploy approximately $13.5 billion over three years, with $9 billion allocated to vehicle replacement and $0.5 billion to dividends. The remaining $4.3 billion will be used for growth opportunities, acquisitions, and share buybacks. Despite softer rental conditions, Ryder anticipates a recovery in rental demand and used truck sales, which could further enhance earnings.

Q&A Highlights

During the Q&A session, CEO Robert Sanchez addressed the current wait-and-see market environment, noting that customers are delaying decisions due to economic uncertainty. Despite this, Ryder’s pipelines remain strong. The rental fleet has been reduced in response to softer conditions, but improvements are anticipated as market conditions stabilize. Additionally, Ryder is working to clear aged inventory in the used truck market, aiming to return to retail-focused sales.

In conclusion, Ryder System Inc. remains committed to its strategic transformation and capital deployment plans, positioning itself for future growth. For a detailed account of the conference call, please refer to the full transcript below.

Full transcript - Wells Fargo Industrials & Materials Conference 2025:

Unidentified speaker, Conference Host, Wells: All right. Well, welcome back to day two of the Wells Industrial and Materials Conference. I’m delighted to continue and segue into the trucking and logistics portion of our conference with Ryder Systems Inc. With us, we’ve got Robert Sanchez, the Chairman and CEO as well as in the audience, Kayleen Candela. So I’m going to turn it over to Robert for some prepared remarks, and then we’ll jump into Q and A.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Okay. Thank you. Well, I’ll just do a quick overview of the company for those of you who may not be as familiar. Ryder is just under $13,000,000,000 Fortune 500 company. We’ve been around for ninety two years.

We’re in the transportation logistics outsourcing business. We operate in North America, U. S, Mexico and Canada. We have about 50,000 employees made up of warehouse workers, truck drivers mainly warehouse workers, truck drivers and technicians. And we operate in about 1,000 different locations across North America.

We do everything from renting trucks to leasing fleets of trucks. We have a fleet of about 250,000 vehicles that we own most of them and maintain all of them. We offer dedicated transportation, so trucks and drivers. And then we offer broad supply chain logistics services such as running distribution centers. We operate about three thirty distribution centers, about 100,000,000 square feet of warehouse space for customers.

We offer e commerce fulfillment services, last mile services for big and bulky. And most recently, we acquired co manufacturing and co packaging services. So broad, as I like to say, port to door services in logistics. We’ve been on a journey over the last five years to really transform the business. And back in end of twenty nineteen, we made a decision we needed to do three things.

Number one is we need to derisk the business, realizing in our leasing business, we were carrying a lot more risk in that business than what we wanted, specifically around used trucks. We were expecting a certain amount of revenue from the final sale of a used truck after the lease that, volatile used truck market really was hurting us. So we made a decision to really derisk that business, lower the residual assumption for all new leases. Five years ago, we are now in the last year of really refreshing the entire portfolio with the new pricing method. We also wanted to improve the profitability of the business, so increase the spreads on the business.

We had historically targeted 60 to 100 basis point spreads on our leases. We moved that up to 100 to 150 and now have had this is our I guess our sixth year now of the 100 to 150 basis point spread. So just better returns on that portfolio of leases. And then we wanted to accelerate the more asset light and in a lot of ways higher return businesses of Supply Chain and Dedicated. So this is the tail of the tape of what that has done to the business.

You look on the left side is 2018 and what our results were in 2018, which was a peak year in the freight market compared to 2025, which today you would argue is we’re probably at a trough or troughy like period of the freight market. The shift in the business, in just round numbers, supply chain and dedicated were about 45% of the revenues of the company in 2018. Today, they’re about 60% of the revenues. The earnings per share that we accomplished in 2018 was just under $6 This year, we’re going to do anywhere between $12.85 and $13.6 So that is almost double the earnings in a trough year today versus what they were in a peak year before the transformation. Return on equity, which is our primary metric.

In a peak year, we were generating about 13% return on equity. This year, we’re targeting in a trough to generate anywhere between sixteen point five percent and seventeen point five percent. And our goal is over the cycle to do in the low 20s. So in a peak year, we’d be in the mid-20s from a return on equity standpoint. And then you can see the operating cash flow increased significantly also.

So I think we’re really proud of the work we’ve done and the transformation of the business. The good news is that there’s still more to come. We have still additional strategic initiatives that we think can improve the business further. We have we identified $150,000,000 of earnings improvement from strategic initiatives that we can execute on. Dollars 20,000,000, 25,000,000 is just from this final tranche of leases that needed to be repriced with the lower residual and the higher returns.

Maintenance costs, which was a big driver of some of the improvement we’ve already had, we still think there’s more to come there. We’ve identified $50,000,000 of additional maintenance cost savings that we can execute on. We did that we’ve done several acquisitions, but one that we did last year was Cardinal and Dedicated, which increased our Dedicated revenue by about 50%. And there were synergies associated with that, which are 40,000,000 to $60,000,000 And the execution on those synergies is also a contributor to that $150,000,000 Those are the big drivers. So $150,000,000 we feel confident that by the end of this year, we’ll have accomplished 100,000,000 of the 150,000,000 So these are things that we have direct line of sight to that are really more independent of what happens in the economy and things that we can execute on.

We then have another $200,000,000 that we’ve identified of earnings improvement just as the economy picks up and as the freight economy picks up, primarily driven by our rental and used truck business. Because as you might imagine, our rental business right now, transactional part of the company is soft. And as that business really picks back up, we see a lot of earnings opportunity there along with used trucks. We do still sell a lot of used trucks. We’re not as reliant on those used trucks to make our earnings, but still have opportunities as the market picks up to get some improvement there.

So a couple of 100,000,000 at least of earnings improvement as we transition from a trough in the freight cycle to a peak. So excited about the opportunities as we go forward. This is something that we wanted to make sure as we talk about cash flow and free cash flow, we really highlight for folks is our capital deployment capacity. Over a three year period, we can generate about $10,000,000,010,500,000,000 of operating cash flow. That also generates an additional $3,500,000,000 of debt capacity.

So we have about $13,000,000,000 $13,500,000,000 of capital that we can deploy over that three year period. Just under $9,000,000,000 will go to replace vehicles that are just at the end of their life, need to be replaced to continue on with the next lease or the next rental. We got about $05,000,000,000 that goes into dividends, leaving us with just about $4,300,000,000 of what we call flexible deployable capital. That’s going to go towards either growth, primarily in our lease and rental business or acquisitions and share buybacks. If you look at the history, we have a history of doing all of those, right?

We’re going to grow the fleet some and we’ll also be able to deploy some capital into share buybacks and acquisitions. And you can assume that’s going to be about a fifty-fifty split, maybe a little bit more on organic growth side. But it goes to show you that we’re kind of in a Goldilocks type model here where we’re able to grow the business, we’re able to generate good returns and we’re able to have the flexibility to do acquisitions when they come up that are right and also give some money back to our shareholders through buybacks.

Unidentified speaker, Conference Host, Wells: So that’s it. Well, Robert, thank you for that overview. And one of the unique things with the Rider story is you guys are going to grow earnings at the midpoint of guidance compared to most transports. We’re seeing earnings move backwards. A lot of that’s driven by the $70,000,000 of kind of company specific initiatives that you laid out.

Could you discuss kind of how much of that 70,000,000 you guys had realized in the first quarter? And kind of what the other big buckets that we’ll see stepping up over the course of the year are?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. I would I mean, you could just take the $70,000,000 assume it’s pro rata through the year is probably a pretty good assumption. It’s basically made up of the big buckets there are the last tranche of leases that are being repriced with the lower residuals and the higher spreads. Maintenance costs, so we talked about $50,000,000 of maintenance cost initiatives. We’ll get a good chunk of those this year.

And then the synergies, you had about $50,000,000 of synergies that we believe we can we’re going to be getting. We have good line of sight to from the Cardinal acquisition. It’s primarily as Cardinal we did have some opportunities from an overhead standpoint to get some benefits, but there’s also a lot of benefits as the vehicles that were running for Cardinal, they were being they were owned by our Cardinal, maintained either by Cardinal or through other parties. As they go into the rider network, we’re able to buy them at a better price. We’re able to maintain them more efficiently and really drive a lot of cost out that way.

So it’s just turning those vehicles through the machine. And that’s why we feel really confident in our ability to hit that.

Unidentified speaker, Conference Host, Wells: And then as we think about that $150,000,000 exiting this year, there’ll be about 50,000,000 left. How should I think about the opportunity to realize that $50,000,000 Is that something that can all happen next year? Is it does it take a couple of years to kind of get there? How should we just kind of think about the full realization

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: of Yes. We haven’t given guidance out that far, but you can assume a lot of that really happens in 2026. Maintenance costs, again, is going be a big driver of that. You will already be done with the pricing. So will be primarily maintenance costs and additional initiatives still related to the synergies.

And then the other piece has really been I didn’t spend a lot of time talking about that. But in our e commerce business, in our multi client warehousing business, as we rationalize that network for the amount of business that we have and also get more business through there, there’s an improvement in earnings too that will flow through there.

Unidentified speaker, Conference Host, Wells: One of the big drivers of just the structural improvement in the margins as well as the earnings and cash flow has been that lease repricing initiative. And as you noted, we’re going to be kind of getting through that. But as I take a step back, one of the big things that we’re hearing yesterday was truck prices go up every year. In addition to that, we’ve seen a big increase in interest expense interest rates more broadly. So all that, I would imagine, would cycle through and provide kind of an incremental kicker as you guys start to cycle that lease repricing initiative.

So maybe you could help us think about how will that benefit Ryder over the next few years? Yes. I think that’s

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: a great point because as the vehicles become more expensive, that’s additional capital we deploy at the higher returns that we’re shooting for. So if you think about inflation over the last since 2018 for trucks, truck costs have gone up 45% over that seven year period. Tractor prices have gone up about 25%. So that inflation gets built into the next lease, and then we build our return on top of that. So yes, that’s the other kicker that I think going forward gives us confidence that you’re going to continue to see earnings growth and good returns.

Unidentified speaker, Conference Host, Wells: So we’ll continue to see the ROI, the ROE you guys are targeting, but it will be at a higher level.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: At a higher capital amount,

Unidentified speaker, Conference Host, Wells: yes. That makes sense. And if there are any questions in the audience, please raise your hand. We will get a mic around. So we do want to make this interactive, but I’m happy to continue kind of driving here.

The cyclical earnings recovery, right? That’s something we’ve been waiting to see, hasn’t been coming there. We’ve had some kind of starts and stops along the way. But how should we think about the big buckets that you guys see? So we’ve got used vehicle and rental.

Those would be the biggest drivers of

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: this.

Unidentified speaker, Conference Host, Wells: You also mentioned a little bit in the SCS segment with some of the warehousing tailwinds. I’d imagine there’s some of the dedicated too, but I’m curious how we should think about that full bucket kind the full $200,000,000 in the buckets?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. I think I guess we’re in our third year now of this freight recession, which is almost unbelievable. But I think we’ve been able to show the resiliency of the contractual part of Ryder’s business, the lease business, the dedicated because our dedicated is really, for the most part, specialized dedicated contracts. And most of our supply chain business, again, multiyear contracts. So you’ve seen our earnings really be able to hold up really well as we’re that’s really the driver of most of the earnings that Ryder has.

The variability comes from rental, so transactional part of the business, which is about less than 10% of the revenues of the company. And then our used vehicle sales gains will move up and down with the price. So where are we on that? I think we’re we keep thinking we’re it looks like we’re bumping along the bottom here, just waiting for the uncertainty, the wait and see to kind of go away and companies to really jump in and start investing and start moving stuff around. But we see a great opportunity there as rental comes back.

Our rental fleet is down about, I think, eight nine thousand units. So we got to just to get our utilization back up to where needs to be, you’re to have a lot of earnings come in. And then in addition, we’ll build up that rental fleet again. And you’ll get significant earnings from that along with gains. Our gains this year are going to be lower than they were last year, still on the low end of what we call normalized and certainly below the peak levels that we’ve seen over the cycle.

Unidentified speaker, Conference Host, Wells: And maybe we could kind of dig a little bit further into rental. You had noted kind of softer conditions in the month of April. Has that continued kind of quarter to date, like the softer underlying conditions when you guys decide, all right, we’re actually going to reduce the fleet a little bit more here?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. We don’t do mid quarter updates. But I’ll tell you, the environment is kind of continues to be this wait and see. We’re kind of seeing companies taking a long time to make decisions, not a big increase in movement yet of stuff. You kind of feel like we’re close.

And I feel like everybody wants to do stuff, but we’re just still seeing customers delaying decisions even around signing long term contracts. And then just not the economic activity yet that I think we’re all hoping for.

Unidentified speaker, Conference Host, Wells: So kind of a coiled spring in rental, we’re just waiting to see that underlying improvement. When you think about the rental fleet, you’ve shifted a lot more to the truck portion away from the kind of the tractor. Are there any meaningful difference in utilization rates that you’re seeing kind of across those two end markets? Are they pretty similar?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. We started to see, on the tractor side, especially on the used sleeper tractors, the used truck part of the business, started to see some improvement there, which is a pretty good sign that maybe the carrier market is beginning to turn a little bit. But we’re still seeing softness, I would tell you. I mean, what we saw in the we talked about in the first quarter, we still saw softness across the market in rental. We’re seeing the big pickup that we would expect.

We weren’t we didn’t in our forecast, we didn’t really count on a big pickup in rental in the second quarter. So yes, I think the uncertainty has been the uncertainty that was originally for because of high interest rates got substituted by uncertainty for the election, substituted now for uncertainty over the tariffs. So hopefully, this is the last of the uncertainty items, but probably not something else will come up. And I think for the full year outlook, you guys basically baked in normal seasonality in the half of the year, but nothing On the high end of our range, we baked in normal seasonality. On the low end, we baked no Okay.

Unidentified speaker, Conference Host, Wells: That’s helpful. And then you had mentioned this kind of a moment ago that your used sleepers, you’re actually seeing a little bit of improvement if we kind of take out some of the aged inventory. Can you remind us kind of what the mix of what your mix was in 1Q of wholesale versus retail? And kind of how you see that playing out over the course of the year? Like will we be done reducing the size of that aged inventory in the second quarter?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. Our goal is to get the aged inventory flushed out this quarter. Okay. So by the end of the second quarter, we should be out of most of that aged inventory. And then we’ll be converting back to more retail type of sales as we get into the half of the year.

Unidentified speaker, Conference Host, Wells: And so when I think about 2Q relative to 1Q, will you be selling more of the aged inventory? Is it similar? Is it less? Just because there’s obviously a negative mix any time we’re doing more wholesale. Yes.

You’re going to

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: see I mean in the second quarter, built in continue to flush out what was left. So there could be a little bit more in the second quarter, again, just to get those units out of the inventory and get into the with the inventory looking more like what we’d like it to.

Unidentified speaker, Conference Host, Wells: And then if I take a step back, we’re finally starting to see some of the underlying green shoots that we would expect, right? The net new orders are coming down, which is negative for the broader business, but should be eventually a positive for the used vehicle sales. So maybe you could walk us through how long after a year or half a year of depressed net orders do we start seeing the used vehicle side prices pick up?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: It’s a complicated calculation because it all depends on demand, right? It depends on how strong demand is. But clearly, when new trucks are being produced, they’re typically being produced to replace a used truck. So it’s generating one used truck into the market. That’s not good when there’s used truck prices are depressed.

So the fact that orders are down is a good sign for the used truck market. And eventually, you that inventory beginning to get flushed out. So I really can’t give you a time frame. I’ve been predicting that this market is going to turn around in six months for the last two years, so I’m not going to keep doing that. I would tell you six months out, things are going be better, but who knows?

Unidentified speaker, Conference Host, Wells: Yes. I mean we’re seeing price increases on the news, so that also helps out demand for used. And candidly, I’ve been amazed that the used units sold has been as high as they’ve been, just given how depressed the market has been for as long as it But hopefully, see an uptick in the not too distant future there. We’ve been talking about this wait and see environment from a leasing perspective, from a demand perspective.

Do you think we just need to get the tariff certainty resolved to additional companies making increases in their capital deployment and thereby helping out underlying truck demand? Or is there something else you think we need to see?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: I think so. I think after the election, there was a sense of, okay, we’re going into an administration now with lower taxes, less regulation. Those are all positives for business. I think the tariffs sort of put a little bit of a monkey wrench in that. And it’s not so much the tariff, but the uncertainty around it, I think is what’s creating some of this.

But I think as we get past that, I think if we can get back to lower taxes, deregulatory environment, I think companies the good news is I think most of the customers that we deal with are in good shape, have good balance sheets. Want to expand. No company gets an award for shrinking. Most companies get awards for growing. And I think most companies want to grow.

So once we get enough visibility to say, okay, know generally what’s going to happen with these tariffs and I know what a little bit more visibility as to what the playing field is going to look like, I think we’ll start to see companies get back into growth mode. Maybe you

Unidentified speaker, Conference Host, Wells: could talk a little bit about what the backlog is for kind of new FMS leases and the dedicated side. Like has that meaningfully changed just given this wait and see approach?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. Our really across all three businesses, our pipelines are strong. It’s just taking customers longer to make decisions. We’re seeing a lot of decisions being put on hold. Let’s wait until next month, which usually happens when there’s uncertainty in the economy.

But yes, I think we’ve now been in a little bit of a long period here of seeing this since probably about a year ago now. If you go back about a year is where we’re right, a little bit more than a year when it really started.

Unidentified speaker, Conference Host, Wells: And are you starting to see any kind of green shoots in whether it’s truck miles driven, lease extensions, redeployments? Is there anything to kind of get us a little bit more excited that maybe we’re getting closer to a turn?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: We did. We saw lease miles per unit. So that’s a metric that we follow to see what our lease customers are doing with their trucks. So we had 11 quarters, I think it was, of decline. And two quarters ago, as we started to see it turn.

So that’s a bit of a positive where it’s still now we’re seeing that our lease customers are using the trucks that they lease from us more. It’s still off of in terms of total miles that they’re running, they’re still off from where they should be or the peak, if you will, where you start to see them add trucks. But a sign that it’s at least bottoming out and maybe coming back.

Unidentified speaker, Conference Host, Wells: How much would you say were below kind of that kind of traditional threshold where people want to add incremental units over

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: ten percent five think it was about a 10% below where we start to see that really improve.

Unidentified speaker, Conference Host, Wells: Interesting. And earlier in our discussion, you had kind of highlighted the opportunity for Cardinal synergies. It sounds like you’re making really good traction on those. As we look at some of your financials, it looks like you brought on about 7,000, give or take, new units from there. There are still probably about five that are under leases, which presumably means you’re paying someone else for that truck.

And how quickly should we think about that those remaining trucks, which are not currently running through FMS that came with Cardinal that

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. Those leases, just as they expire, they’re typically operating leases with banks, many of them. So as they expire, we’re turning them over into Ryder. So a lot of that will be a good chunk of it will be done this year and then there’ll be some that will still carry over into next year.

Unidentified speaker, Conference Host, Wells: And then just thinking about the DTS segment, if I go back kind of 2022, 2023, you guys were at the base of the high end of kind of the range in that 8% to 9% margin. How quickly do you think we can get back there? Is it just as simple, hey, once we get the 40% to 60% of synergies we’re targeting at Cardinal, we’ll be there? Or is there something else you guys need to see to

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: get back That’s a big part of it. I think the 40% to 60 is a big chunk of it. Maybe a little bit as we go into 2020, we now had a period where we just haven’t had a lot of organic growth. This company is just taking longer to make decisions. So as we get into 2026, you’ll start to see some of that growth come back and I think that should help us get back in that range.

But yes, I don’t I do expect us to get back in that range. We’ve kept that as our long term target. It really has been as we brought in some of the Cardinal business, some of that business had lower margins because some of the cost issues that we’ve talked about. But also some of these contracts we’ve had to go back and relook it also. So I’d expect we’d be able to get that done here over the next twenty four months.

Unidentified speaker, Conference Host, Wells: That’s great. And has some of the kind of margin erosion also been companies that are securing dedicated capacity have seen kind of fleet reductions and that’s a headwind as well?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: That’s good point. Yes, where most of our business is specialized dedicated, not dedicated capacity. During COVID, there were customers who were moving stuff through truckload that said, you know what, I can’t find capacity. Let me just add some trucks to my dedicated fleet. Those vehicles over time have been going away, And that’s created some certainly some pressure on the top line for Dedicated.

And can

Unidentified speaker, Conference Host, Wells: you remind us about your Dedicated fleet expectation? I think it was roughly flattish for the year, but can you kind of remind us kind of your expectation the baked into guidance there?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. We’re going to be below our target in terms of growth. And that’s primarily because of the environment we’re in. We’re just not seeing a lot of companies making decisions. Plus for Dedicated, I’d argue it’s also the freight market is just soft still.

And until that starts to pick up and people have a tough time finding truck drivers and being able to secure the movement of freight, that’s when typically when things get hard in terms of operations, that’s when it’s good for Ryder. So when it’s hard to find a truck driver, hard to find move your load, that’s really good for us. If it’s hard to maintain a truck, that’s really good for us. If it’s hard to move supply chain stuff around, that’s good for us. The good thing is supply chain complexity, think, is continuing to be difficult and complicated, which is why that part of the business is continuing to grow really nicely.

Unidentified speaker, Conference Host, Wells: Yes. No. That’s always been a big driver of Dedicated. And if I look at the rider margins, given the targets relative to some of the best in class out there, some of your competitors can get up to the double digits. Is that just a difference of network density?

Is that do you think it’s some of the spot opportunities that truckload players generate? Structurally, can Ryder achieve do you think they could achieve in the future? Yes.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: We’re getting pretty close to that. I think we’ve been pretty close to that number. The gap historically has been density, as you mentioned, the ability also to double utilize equipment with some of the other businesses that our competitors have. But we haven’t given up on that. We do kind of view that as a long term goal that we’d like to get to.

Unidentified speaker, Conference Host, Wells: And segueing back to the FMS business. Historically, of within this new pricing regime, you’ve been targeting 2,000 to 4,000 of net unit additions. Obviously, we haven’t been at that level. Kind of more recent, I think a lot of that is the demand backdrop. Do you think that’s the right level for Ryder from a growth perspective, from a returns perspective?

And we’re just in a softer environment? Or maybe should it be lower than that level?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. No, I think 2% to 4% is the right one. That’s where we’ll have good earnings growth, good top line growth, but also good free cash flow. So that is kind of the Goldilocks level. Since we have been below for a few years, we might see us get a little bit above that when the market picks back up.

But that’s a good average over the cycle is what we would expect to get.

Unidentified speaker, Conference Host, Wells: And should we think about kind of going above that level? Is that growth in rental that, that drives kind of the incremental growth? Or is it more of growth of the traditional FMS customers?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Well, the 2,000 to 4,000 is lease growth. So over that, we would have some rental growth as we build our rental fleet back up. But you’re going to get a chunk of that from just customers who have a fleet needing an additional they have 10 trucks and need one more. So you get a portion of that. And some will be new customers that we bring in that maybe have their own that buy their own trucks and their own maintenance and they’re in the private fleet and we bring them into the lease fleet.

Unidentified speaker, Conference Host, Wells: Interesting. And are you seeing any changes in terms of the private fleet conversations, the tenor there? Or has it just been like we’ve talked about kind of across the business, the steady state wait and see?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. It’s been generally wait and see. I think most customers are sticking with what they’re doing right now, and no one’s making big changes until they see kind of where things are going.

Unidentified speaker, Conference Host, Wells: I guess we’ve seen the strength of the balance sheet, right? You’re kind of at the lower end of the target leverage of where you guys want to be. How should we think about capital deployment as well as the leverage for Ryder at this point in the cycle and kind of as we move out over the next couple of years as things start to improve?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. Our target leverage debt to equity is $250,000,000 to 300,000,000 We’re on the low end of that. The nice thing is that with that growth that we’ve talked about of 2,000 to 4,000 unit lease growth and getting our rental fleet kind of moving in the same direction, I think that puts us in a position where we’re growing our earnings, we’re delevering. The business model naturally delevers at that, gives us an opportunity to do acquisitions when they come up that are meaningful and also do share buybacks. So it really kind of gives us a lot of options around what we do with our capital.

And we can do it in the way that’s going to give us the best return.

Unidentified speaker, Conference Host, Wells: And how do you think about kind of the capital deployment, just given kind of where the stock is as well as discussions, I would imagine, times like this, they’re harder. So there might be more attractive valuations from an M and A perspective. How are you balancing those?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. Look, you would think in this environment, maybe there is. But at the same time, we’re looking for good companies. We’re looking for good, well run companies. We’re not looking for turnarounds.

So good companies may not want to sell in this environment, want to wait for a better environment. So we’re still We’re looking to see who’s who would be a good fit. We’ve got a team that’s always in the market. If we find a right fit, we found another cardinal, I think we would like that.

If we found a new capability for our supply chain business, I think we would like that. And then we also always would do tuck ins in our leasing business where they make sense. So those are basically the three types of businesses that we focus on.

Unidentified speaker, Conference Host, Wells: There’s a lot of discussions about kind of a tax bill going around. So hopefully, do see that to incentivize growth. Bonus depreciation, riders obviously got a massive lease fleet you’re investing every year. What would that mean for the company?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes. That’s a great point. I’m glad you brought that. It’s a very meaningful thing for us. We invest 2,500,000,000.0 to $3,000,000,000 a year on trucks.

So bonus depreciation is very meaningful for us. It would mean about $200,000,000 of incremental cash flow for the company a year. We don’t it doesn’t do a whole lot on the earnings side on the earnings per share, but it does give us a meaningful free cash flow benefit.

Unidentified speaker, Conference Host, Wells: And is there a preference of how that cash would be redeployed, or it just depends on what the demand environment is?

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Market comes back. Hopefully, it’s coming back. We’re going to be deploying that to the additional maybe 2,000 to 4,000, maybe a little bit more lease units. We’re going to build back our rental fleet. And then obviously, we’ll still have money to continue to do acquisitions when they come up and buybacks.

And again, most of our acquisitions, just to give you these aren’t bet the farm type acquisitions. They tend to be anywhere from $200,000,000 up to maybe I think the $5 $600,000,000 has been the largest.

Unidentified speaker, Conference Host, Wells: Yes. And one thing I haven’t heard a lot about recently has been the 2027 emissions changes. Are you hearing about any pre buys that are going to go along with that? Candidly, I’m not, but I’m curious you’ve got a much bigger customer base that you’re talking to.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Yes, we’re not at this point. I think there’s still some uncertainty about exactly what that’s going to be given the new administration, but there’s not a big move. I think it’s a combination of the uncertainty around what the 2027 is going to be and also the market soft. So when the market soft, you don’t see a lot of people thinking too much about let me go buy a new truck. So I think that if it’s going to happen, it’s getting pushed out.

Again, wasn’t a big that was going to be a benefit possibly for us in the long term for used trucks because the pre O327s. But again, nothing that we were counting on to hit our targets.

Unidentified speaker, Conference Host, Wells: Yes. And certainly, we’re seeing it in the net orders right now. There is much less demand for trucks, but it’s a cyclical market, as we all know.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: It’s not a surprise. I think this is what we normally see. You see people pull back. The market gets back in equilibrium, and then you’ll see orders come back in and the market pick back up. This has just taken longer, I think, than what we’ve seen historically.

It’s also because we came off of the COVID years where everything got way out of balance the other way.

Unidentified speaker, Conference Host, Wells: And as you’re surveying for the potential inflection, what are the couple of key KPIs you’re looking at to give you the sense, all right, it’s time to start growing the rental fleet Yes.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: So we look at, obviously, rental utilization. We look at lease miles per unit. And then we look at our used truck market and used truck pricing and see what’s happening with those.

Unidentified speaker, Conference Host, Wells: Hopefully, we start to see an uptick there. But Robert, appreciate it. And we’ll leave it there.

Robert Sanchez, Chairman and CEO, Ryder Systems Inc.: Great. Thank you. Thank you for having us. Appreciate it. My pleasure.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.