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Commercial rental vehicle and delivery company Ryder (NYSE:R) fell short of analysts' expectations in Q2 CY2024, with revenue up 10.3% year on year to $3.18 billion. It made a GAAP profit of $2.84 per share, improving from its loss of $0.39 per share in the same quarter last year.
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Ryder System (NYSE:R) Q2 CY2024 Highlights:
- Revenue: $3.18 billion vs analyst estimates of $3.24 billion (1.9% miss)
- EPS: $2.84 vs analyst estimates of $2.75 (3.1% beat)
- EPS (non-GAAP) Guidance for Q3 CY2024 is $3.40 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 19.8%, down from 20.5% in the same quarter last year
- Free Cash Flow of $231 million is up from -$160 million in the previous quarter
- Market Capitalization: $5.69 billion
As one of the first companies to introduce the idea of leasing trucks, Ryder (NYSE:R) provides rental vehicles to businesses and delivers packages directly to homes or businesses.
Ground TransportationThe growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Regrettably, Ryder System's sales grew at a mediocre 6.7% compounded annual growth rate over the last five years. This shows it couldn't expand in any major way and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Ryder System's recent history shows its demand slowed as its annualized revenue growth of 5.7% over the last two years is below its five-year trend. We also note many other Ground Transportation businesses have faced declining sales because of cyclical headwinds. While Ryder System grew slower than we'd like, it did perform better than its peers.
Ryder System also breaks out the revenue for its most important segments, Fleet Management Solutions and Supply Chain Solutions, which are 46.4% and 42.1% of revenue. Over the last two years, Ryder System's Fleet Management Solutions revenue (leasing and rental) averaged 1.3% year-on-year declines. On the other hand, its Supply Chain Solutions revenue ( designing and managing customers' distribution) averaged 16.2% growth.
This quarter, Ryder System's revenue grew 10.3% year on year to $3.18 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 12.3% over the next 12 months, an acceleration from this quarter.
Operating Margin Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Ryder System was profitable over the last five years but held back by its large expense base. It demonstrated mediocre profitability for an industrials business, producing an average operating margin of 7.2%. This isn't too surprising given its low gross margin as a starting point.
On the bright side, Ryder System's annual operating margin rose by 1.9 percentage points over the last five years.
This quarter, Ryder System generated an operating profit margin of 8.2%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPS We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Ryder System's EPS grew at a remarkable 12.3% compounded annual growth rate over the last five years, higher than its 6.7% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into Ryder System's quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Ryder System's operating margin was flat this quarter but expanded by 1.9 percentage points over the last five years. On top of that, its share count shrank by 15.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Ryder System, its two-year annual EPS declines of 11.5% show its recent history was to blame for its underperformance over the last five years. We hope Ryder System can return to earnings growth in the future.
In Q2, Ryder System reported EPS at $2.84, up from negative $0.39 in the same quarter last year. This print beat analysts' estimates by 3.1%. Over the next 12 months, Wall Street expects Ryder System to grow its earnings. Analysts are projecting its EPS of $10.94 in the last year to climb by 13.6% to $12.43.
Key Takeaways from Ryder System's Q2 Results It was good to see Ryder System beat analysts' EPS expectations this quarter. On the other hand, its revenue unfortunately missed as its Fleet Management Solutions segment fell short Wall Street's estimates. Overall, this was a mixed quarter for Ryder System. The stock remained flat at $128.88 immediately after reporting.
