Ryder (NYSE:R) Misses Q3 Revenue Estimates

Commercial rental vehicle and delivery company Ryder (NYSE:R) missed Wall Street’s revenue expectations in Q3 CY2024, but sales rose 8.3% year on year to $3.17 billion. Its GAAP profit of $3.24 per share wasin line with analysts’ consensus estimates.

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"Ryder’s solid third-quarter performance reflects continued execution of our balanced growth strategy," says Ryder Chairman and CEO Robert Sanchez.

Company Overview

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 Transportation

The 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 Growth

A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Ryder’s sales grew at a mediocre 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’s recent history shows its demand slowed as its annualized revenue growth of 4% 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 grew slower than we’d like, it did perform better than its peers.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Fleet Management Solutions and Supply Chain Solutions, which are 46.4% and 41.6% of revenue. Over the last two years, Ryder’s Fleet Management Solutions revenue (leasing and rental) averaged 2.7% year-on-year declines. On the other hand, its Supply Chain Solutions revenue ( designing and managing customers' distribution) averaged 11.2% growth.

This quarter, Ryder’s revenue grew 8.3% year on year to $3.17 billion, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.3% over the next 12 months, an acceleration versus the last two years. This projection is commendable and indicates the market thinks its newer products and services will fuel higher growth rates.

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Operating Margin

Ryder was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the bright side, Ryder’s annual operating margin rose by 1.4 percentage points over the last five years.

In Q3, Ryder generated an operating profit margin of 8.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Analyzing long-term revenue trends tells us about a company’s historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Ryder’s EPS grew at an astounding 32.1% compounded annual growth rate over the last five years, higher than its 7% annualized revenue growth. This tells us the company became more profitable as it expanded.

We can take a deeper look into Ryder’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Ryder’s operating margin was flat this quarter but expanded by 1.4 percentage points over the last five years. On top of that, its share count shrank by 16.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Ryder, its two-year annual EPS declines of 18.7% mark a reversal from its (seemingly) healthy five-year trend. We hope Ryder can return to earnings growth in the future.

In Q3, Ryder reported EPS at $3.24, down from $3.48 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Ryder’s full-year EPS of $10.71 to grow by 23.2%.

Key Takeaways from Ryder’s Q3 Results

We struggled to find many strong positives in these results. Its revenue unfortunately missed and its EBITDA fell short of Wall Street’s estimates. Additionally, full year EPS guidance was lowered. Overall, this was a softer quarter. The stock traded down 1% to $143.54 immediately after reporting.

Ryder’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.