Ryder Reports Fourth Quarter and Full Year 2020 Results

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(Positive)

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Ryder System, Inc. (NYSE: R) reported its Q4 2020 results, showing significant year-over-year earnings improvement. The total revenue declined 3% to $2.21 billion, with a notable 10% increase in Supply Chain Solutions revenue. The company's GAAP EPS was $0.48, compared to a loss of $1.02 in 2019. Ryder generated $1.6 billion in free cash flow, aligning with its cyclical targets. The outlook for 2021 includes mid-single digits revenue growth and a projected GAAP EPS of $4.18 to $4.68, driven by lower depreciation and improved market conditions.

Positive

Net income from continuing operations improved to $25.8 million compared to a loss of $53.1 million in Q4 2019.
Free cash flow of $1.6 billion achieved in 2020.
10% increase in Supply Chain Solutions revenue YoY.
Strong rental fleet utilization at 79%, up from 76% YoY.

Negative

Total revenue decreased by 3% year-over-year.
Fleet Management Solutions revenue dropped by 7%, reflecting lower demand.
Dedicated Transportation Solutions revenue down 13% compared to Q4 2019.

02/11/2021 - 07:55 AM

Ryder System, Inc. (NYSE: R), a leader in supply chain, dedicated transportation, and fleet management solutions, reported results for the three months ended December 31 as follows:

Ryder Reports Fourth Quarter and Full Year 2020 Results (Photo: Business Wire)

(In millions, except EPS)	Earnings (Loss) Before Taxes				Earnings (Loss)				Diluted Earnings (Loss) Per Share
	2020		2019		2020		2019		2020		2019
Continuing operations (GAAP)	$	23.3	$	(122.2)	$	25.8	$	(53.1)	$	0.48	$	(1.02)
Non-operating pension costs	1.8		40.3		0.6		30.6		0.01		0.59
Restructuring and other, net	8.8		21.6		7.4		16.1		0.14		0.31
ERP implementation costs	7.1		7.6		5.3		5.7		0.10		0.11
Gains on sale of properties	(1.7)		—		(1.6)		—		(0.02)		—
Early redemption of medium-term notes	9.0		—		6.9		—		0.13		—
Tax adjustments, net	—		—		(0.4)		—		(0.01)		—
Comparable (non-GAAP)	$	48.3	$	(52.7)	$	43.9	$	(0.7)	$	0.83	$	(0.01)
Note: Amounts may not be additive due to rounding.

Total and operating revenue for the three months ended December 31 were as follows:

(In millions)	Total Revenue				Operating Revenue (non-GAAP)
	2020		2019	Change	2020		2019	Change
Total	$	2,213	2,277	(3)%	$	1,839	1,839	—%
Fleet Management Solutions (FMS)	$	1,335	1,432	(7)%	$	1,193	1,224	(3)%
Supply Chain Solutions (SCS)	$	711	649	10%	$	506	466	8%
Dedicated Transportation Solutions (DTS)	$	301	346	(13)%	$	231	241	(4)%

CEO Comment

Commenting on the company's results and outlook, Ryder Chairman and CEO Robert Sanchez said, "I am pleased that we delivered significantly higher year over year earnings in the fourth quarter and made progress on our initiatives to improve returns. We generated $1.6 billion of free cash flow in 2020 in line with our goal to deliver positive free cash flow over the cycle.

"Improving used vehicle market conditions resulted in gains on sale in the second half of 2020 and enabled us to reduce inventory levels to within our target range. Actions taken to align the rental fleet size with lower demand conditions following the pandemic have been successful, resulting in fourth quarter utilization levels higher than prior year. ChoiceLease pricing initiatives continue to benefit returns and are resulting in higher revenue per new lease vehicle. Ongoing progress on our multi-year maintenance cost-savings initiative generated $30 million in savings in 2020.

"Efforts to accelerate growth in SCS and DTS continue and include the launch of our national multimedia advertising campaign, which has generated an increase in sales leads and traffic to Ryder.com. The 2020 launch of RyderShare, our digital platform for real-time freight visibility and collaboration, continues to gain traction as the platform has been used to track almost two million shipments for supply chain and dedicated customers.

“Finally, I'm extremely grateful to Ryder's frontline employees who have continued to deliver in a very difficult environment, and in recognition we awarded them one-time bonuses totaling $28 million."

Outlook

	Full Year 2021
Total Revenue Growth	mid-single digits
Operating Revenue Growth	mid-single digits
FY21 GAAP EPS	$4.18 - $4.68
FY21 Comparable EPS	$4.15 - $4.65
YOY Earnings Benefit from Lower Depreciation Impact (excl. UVS, net)	~$220M
Tax Rate	high 20's

Adjusted Return on Equity ⁽¹⁾	10% - 11%
Cash from Operating Activities	$2.20B
Free Cash Flow	$400M - $700M
Capital Expenditures	$2.0B - 2.3B

	First Quarter 2021
1Q21 GAAP EPS	$0.30 - $0.40
1Q21 Comparable EPS	$0.50 - $0.60
YOY Earnings Benefit from Lower Depreciation Impact (excl. UVS, net)	~$50M

(1) The non-GAAP elements of the calculation have been reconciled to the corresponding GAAP measures. A numerical reconciliation of net earnings to adjusted net earnings and average shareholders' equity to adjusted average equity is provided below.

"While the 2021 market environment remains uncertain and may be impacted by developments related to COVID-19 and other factors, we expect improving economic conditions, continued secular trends that favor outsourcing, and progress on our strategic initiatives. Based on this outlook and an improved deal pipeline, we expect higher contractual sales activity. Operating revenue growth in SCS and DTS is expected to be within the high-single-digit target range, with FMS growth near the lower end of the mid-single digit target range.

"The expected earnings benefit related to a lower depreciation expense impact from prior residual value estimate changes, better rental performance, and our actions to improve returns are expected to be the key contributors to approaching our interim target for adjusted ROE of 11% in 2021. Used vehicle market pricing is anticipated to modestly improve throughout the year. We're planning to grow the rental fleet to capture increased demand from a strong e-commerce and freight environment. The benefits from higher lease pricing and our maintenance cost-savings initiative are expected to be partially offset by a smaller lease fleet. We expect to deliver strong free cash flow this year, consistent with our goal to generate positive free cash flow over the cycle.

"We are accelerating investments in strategic initiatives to capitalize on the growing market demand for innovative supply chain solutions, improve the customer experience, expand sales capabilities, and achieve our growth and return targets over time."

Fourth Quarter Business Segment Operating Results

Fleet Management Solutions: Earnings Increased Primarily Reflecting Improved Used Vehicle Sales Results, Including Declining Impact of Depreciation Expense from Prior Residual Value Estimate Changes, and Better Results in Lease and Rental

(In millions)	4Q20		4Q19	Change
Total Revenue	$	1,335	1,432	(7)%
Operating Revenue ⁽¹⁾	$	1,193	1,224	(3)%

Earnings Before Tax (EBT) ⁽²⁾	$	60	(80)	NM
FMS EBT as a % of FMS total revenue	4.5%		(5.6)%	NM
FMS EBT as a % of FMS operating revenue ⁽¹⁾	5.0%		(6.6)%	NM

Full-year EBT as % of total and operating revenue	FY20		FY19	Change
FMS EBT as a % of FMS total revenue	(2.7)%		(1.3)%	(140) bps
FMS EBT as a % of FMS operating revenue ⁽¹⁾	(3.1)%		(1.5)%	(160) bps
⁽¹⁾Non-GAAP financial measure excluding fuel and lease liability insurance revenue. ⁽²⁾EBT in 4Q20 and 4Q19 included $86M and $148M of depreciation expense, respectively, from the impact of policy and accelerated depreciation and used vehicle sales results due to 2020 and 2019 residual values estimate changes. NM - Not Meaningful

In the Fleet Management Solutions (FMS) business segment, total revenue declined due to lower fuel and operating revenue. Operating revenue declined due primarily to a 7% decrease in rental revenue from lower demand on a smaller fleet.

FMS EBT increased by $141 million reflecting a declining impact of depreciation expense from prior vehicle residual value estimate changes and higher gains on used vehicles sold together totaling $62 million. We significantly reduced our used vehicle inventory to within our target range at year-end. Lease results benefited from lower insurance costs from the discontinuance of the lease liability product and higher pricing on lease vehicles. Rental power fleet utilization in the quarter was strong at 79%, up from 76% in the prior year on a 16% smaller fleet. Utilization increased due to improving economic conditions and actions taken to align the fleet with market demand. Rental results benefited from lower maintenance costs, including benefits from our cost-savings initiative, and higher pricing. FMS earnings before tax as a percentage of FMS operating revenue is below the company's long-term target of high single digits, reflecting depreciation from prior residual value estimate changes.

Supply Chain Solutions: Results Benefited from Higher Pricing and Growth

(In millions)

4Q20

4Q19

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