Ryder Systems Sees Strong Q1 Growth Amid Strategic Shift Away from Trucking Cycles
US trucking and contract logistics giant Ryder Systems reported a 17.5% year-over-year increase in GAAP earnings before tax (EBT) to $134 million, on revenues that grew 1.1% to $3,131 million. The growth was driven by the company’s core strategy of insulating itself from the cyclical trucking industry through its Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (SCS) businesses. The company remains on track to achieve the expected benefits in 2025 from strategic initiatives that are already well underway.
These initiatives focus on emphasizing the less cyclical segments of Ryder’s portfolio—namely, contract logistics through SCS and dedicated transportation through DTS—while reducing reliance on the legacy Fleet Management Solutions (FMS) truck rental division.
Dedicated Transportation Solutions Sees Significant Profit Growth
Although from a relatively low base, DTS reported a 50.0% year-over-year increase in EBT to $27 million, supported by a 19.7% rise in revenues to $602 million. The growth reflected synergies from acquisitions as well as costs related to prior-year integration. DTS continued to benefit from the strong performance of Ryder’s legacy dedicated business, which is supported by pricing discipline and favorable market conditions for recruiting and retaining professional drivers.
Supply Chain Solutions Demonstrates Record Growth
The supply chain division delivered record first-quarter earnings, driven by the execution of strategic initiatives and new business wins. The division’s EBT grew 35.9% year-over-year to $87 million, with revenues increasing slightly by 0.1% to $1,331 million. This strong performance reflects the division’s focus on expanding its client base and implementing strategic initiatives.
Fleet Management Solutions Faces Challenges from Market Downturn
The FMS division, which accounts for approximately 38% of Ryder’s total revenue, saw its EBT decline by 6.0% year-over-year to $94 million, despite revenues growing marginally by 0.5% to $1,447 million. The division relies heavily on other trucking fleets that require additional capacity, making it particularly vulnerable to the ongoing recession in the US trucking industry.
Looking Ahead: Will Ryder Outperform the Economy?
The company remains optimistic about its prospects, confident that it will outperform the broader economy despite current challenges. This outlook is supported by profitable growth in contractual lease, dedicated, and supply chain businesses.
Regarding exposure to volatile international trade, the company’s leadership notes that the situation involves swings and roundabouts. The automotive sector, which primarily sells cars in the US, is seeing minimal impact. Similarly, consumer packaged goods are not significantly affected. However, the company is closely monitoring the omnichannel retail sector. Some shipments from China are slowing down, but others from different countries are experiencing an acceleration. Overall, the majority of Ryder’s supply chain work is currently unaffected.
Overall, Ryder Systems’ strategy of reducing exposure to the cyclical US trucking industry appears to be paying off, especially amid the current downturn in that market. This cautious approach seems prudent given the broader economic uncertainties.
