Ryder System’s fourth-quarter results showed resilience despite a stagnant freight market, signaling that the company’s transition to a more diversified business model is gaining traction. The company’s operating revenue rose to $2.6 billion, up from $2.4 billion a year ago, while earnings per share (EPS) climbed by 17%, reaching $3.45 from $2.95 in the same period last year. Free cash flow also saw an improvement, moving into positive territory at $133 million, compared to negative $54 million in 2023.
Acquisition of Cardinal Logistics Boosts Dedicated Transport Services
While overall revenue growth was modest, much of the increase was driven by Ryder’s acquisition of Cardinal Logistics in February 2024, which strengthened its Dedicated Transport Services (DTS) division. The DTS sector saw a substantial rise in revenue from $324 million to $472 million, largely attributed to the Cardinal acquisition. However, other core sectors, such as Fleet Management Solutions (FMS) and Supply Chain Solutions (SCS), experienced limited growth. FMS remained flat at $1.3 billion, while SCS grew by just 4%, reaching slightly over $1 billion.
A Shift Towards a Resilient Business Model
CEO Robert Sanchez highlighted the company’s ongoing transformation to reduce reliance on the traditional truck rental business, focusing instead on more stable, contractual income sources. Ryder has shifted its revenue structure significantly since 2018, with SCS and DTS now accounting for 61% of total revenue, up from 44% in 2018. This transformation has led to improved profitability metrics, such as a 16% return on equity in 2024, compared to 13% in 2018.
Sanchez discussed Ryder’s long-term strategic shift, which has made the company more resilient amid freight market challenges. “We’re seeing benefits from initiatives focused on enhancing returns,” he said. Ryder’s growing reliance on contractual business has helped stabilize performance during periods of market downturn.
Muted Growth Expected in 2025
Looking ahead, Ryder projects only a modest 2% growth in revenue for 2025, with an expected EPS increase of 8% to 17%. Sanchez cautioned that the company’s growth will not be driven by a strong freight market but rather by continued improvements in its contractual business and synergies from the Cardinal acquisition. Ryder anticipates slight seasonal improvement in rental demand later in the year, but growth will largely be fueled by structural changes rather than organic market expansion.
Challenges in the Used Vehicle Market
The used vehicle market remains weak, with prices falling sharply between the fourth quarters of 2023 and 2024. Ryder does not expect substantial growth from the sale of used vehicles in 2025, with prices expected to remain in line with 2024 levels.
Opportunities in Logistics Outsourcing
Despite the ongoing challenges, Ryder remains optimistic about the secular trend toward logistics outsourcing. The company expects incremental growth in its DTS division as businesses seek solutions to tighten freight capacity and driver availability. Steve Sensing, president of SCS and DTS, noted that while freight rates are still low, there is potential for growth as market conditions improve.
In conclusion, Ryder’s focus on structural changes, contractual growth, and strategic acquisitions positions the company to navigate the continued challenges in the freight market, with a steady outlook for 2025.
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