The commercial fleet management, dedicated transportation and supply chain solutions provider saw second quarter net earnings drop 14 percent to $74 million compared to the same 2015 period despite a 2 percent uptick in revenues.
Ryder System, Inc. posted net earnings of $74 million in second quarter 2016, a 14 percent decrease from the same 2015 period, according to the company’s latest financial statements.
The commercial fleet management, dedicated transportation and supply chain solutions provider saw second quarter diluted earnings per share (EPS) similarly drop 14 percent to $1.38 per share, compared to $1.61 per share the previous year, despite a 2 percent year-over-year uptick in revenues to $1.7 billion.
Ryder said the increase reflected higher revenues across all business segments, which were partially offset by negative impacts from foreign exchange and lower fuel costs.
The company’s Fleet Management Solutions (FMS) business segment reported earnings before tax of $111.2 million in the second quarter 2016, down 9 percent from the same 2015 period. Revenues in the FMS division stood relatively flat at $1.15 billion for the quarter.
Ryder attributed the decrease in FMS earnings to lower commercial rental performance as well as lower used vehicle results, partially offset by higher full service lease performance and reduced overhead spending.
Earnings in its Dedicated Transportation Solutions (DTS) business segment shot up 32 percent to $16.5 million in the second quarter thanks to a 16 percent year-over-year increase in operating revenues to $258 million. Ryder said DTS revenues grew as a result of new business, as well as higher pricing and increased volumes.
The firm’s Supply Chain Solutions (SCS) segment saw earnings slip 2 percent to $28.4 million for the quarter as revenues ticked up 1 percent to $402 million compared with second quarter 2015. SCS revenue growth resulted from new business, increased volumes and higher pricing, with total revenues partially offset by lower subcontracted transportation and reduced fuel costs passed through to customers.
Year-to-date, Ryder’s capital expenditures decreased to $1.01 billion, compared with $1.45 billion in the comparable 2015 period thanks primarily to lower planned investments in the commercial rental fleet.
“We modestly outperformed our second quarter forecast, despite a challenging freight transportation environment, primarily due to better full service lease results and lower overheads,” Ryder Chairman and CEO Robert Sanchez said of the results. “We continued to execute well on our long-term strategy, demonstrating solid organic growth in our contractual businesses in the quarter.
“This revenue growth, along with other items from our 2016 playbook, including overhead reductions and rental fleet right-sizing actions, largely offset weakness in the rental and used vehicle markets,” he added. “Ryder’s largest product line, full service lease, grew 9% with a fleet count that is now up by 3,000 vehicles for 2016. The dedicated transportation business also delivered double-digit growth in both revenue and earnings, as we continued to benefit from converting existing lease customers to expanded, higher value solutions.
“Strong secular business trends continued to drive outsourcing, particularly in our lease business, where approximately 40% of new business in 2016 has come from customers that are new to outsourcing,” noted Sanchez. “We furthered Ryder’s ability to leverage these trends with the launch of two new products, ChoiceLease Preventive and ChoiceLease On-Demand, during the quarter. These offerings provide new ways to attract more of the large do-it-yourself market that has not yet experienced the cost and efficiency benefits of fleet outsourcing.”
Looking forward to the rest of 2016, Sanchez said the company is loweing expectations for rental demand and used vehicle volumes, particularly tractors.
“We expect used vehicle sales pricing to be consistent with recent trends,” he said. “Used vehicle sales inventories peaked in the second quarter and are expected to decline to the high end of our target range by year end. In light of the soft environment, we continue to execute on our playbook by growing our contractual businesses, reducing our rental fleet, maximizing our used truck proceeds while managing inventories, and controlling discretionary spending.
“Although we are experiencing some market softness impacting the transactional parts of our business, we continue to benefit from secular outsourcing trends and deliver on our long-term strategy to drive growth from further penetration of the non-outsourced market,” added Sanchez. “Full-year lease fleet growth is anticipated to be 4,000 vehicles, up from a prior forecast of 3,500, reflecting increased redeployments in the first half of the year. Supply Chain Solutions and Dedicated Transportation Solutions are both anticipated to deliver solid contributions to revenue and earnings, in line with our prior expectations.”
As a result, Ryder revised its full-year 2016 EPS forecast to a range of $5.49 to $5.64 per share from a prior forecast of $5.79 to $5.99 per share, including a third quarter 2016 EPS forecast range of $1.57 to $1.64 per share.
Ryder Q2 profits fall despite increased revenues
