Ryder's Q3 2025: Contradictions Emerge on Bonus Depreciation's Impact, Used Vehicle Pricing, Earnings Growth Drivers, CDL Regulations, and Private Fleet Growth

Date of Call: None provided

Financials Results

• Revenue: $2.6B, up 1% YOY
• EPS: $3.57 per share (comparable EPS), up 4% YOY from $3.44

Guidance:

• Full-year 2025 comparable EPS expected $12.85–$13.05 (prior year $12).
• Q4 2025 comparable EPS expected $3.50–$3.70 (prior year $3.45).
• ROE forecast unchanged at 17%.
• Free cash flow forecast $900M–$1B; includes ~ $200M annual cash benefit from reinstated bonus depreciation.
• Full-year gross CapEx ~ $2.3B; net CapEx ~ $1.8B; lease spending ~$1.8B; rental CapEx ~$300M.
• Expect ~$100M incremental initiative benefits in 2025 and $150M run-rate from initiatives, with at least $200M annual benefit by next cycle peak.

Business Commentary:

• Earnings and Revenue Growth:
• Ryder System reported operating revenue of $2.6 billion in Q3 2025, up 1% from the prior year.

• The earnings growth was driven by contractual revenue growth in Supply Chain Solutions (SCS) and Fleet Management Solutions (FMS), despite headwinds from freight market conditions.

• Supply Chain Performance:

• Operating revenue in Supply Chain Solutions increased by 4%, driven by new business in omnichannel retail.

• Despite this, supply chain earnings decreased by 8% due to lower e-commerce network performance and higher medical costs.

• Fleet Management and Used Vehicle Sales:

• Fleet Management Solutions had pre-tax earnings of $146 million, up year-over-year, primarily due to pricing initiatives and maintenance cost savings.

• Used vehicle sales were down, with a 6% year-over-year decline in tractor pricing and a 15% decline in truck pricing, impacted by market conditions and strategic actions to sell aged inventory.

• Capital Allocation and Shareholder Returns:

• Ryder returned $457 million to shareholders in 2025 through share repurchases and dividends, continuing a trend of significant returns.
• The company has repurchased approximately 22% of its shares outstanding since 2021, reflecting a commitment to disciplined capital allocation.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted the "fourth consecutive quarter of earnings per share growth," operating revenue of $2.6B (up 1% YOY), and an updated full-year EPS outlook of $12.85–$13.05. They reiterated a 17% ROE target and free cash flow of $900M–$1B while forecasting multi-year strategic initiative benefits and continued share repurchases.

Contradiction Point 1

Impact of Bonus Depreciation on Customer Behavior

It involves the potential impact of bonus depreciation on customer behavior and its effect on Ryder's leasing business, which is crucial for strategic decision-making.

Are there capital structure changes as the business shifts to a dedicated supply chain? - Ben Moore (Citi)

2025Q3: Bonus depreciation historically leads to increased business spending, benefiting Ryder by providing more opportunities for leasing and service offerings. It stimulates the economy and supports customer investments. - Robert Sanchez(CEO)

How does bonus depreciation's cash flow impact affect customer behavior? Is there a risk of customers switching to purchasing? - Scott Group (Wolfe Research)

2025Q2: Bonus depreciation historically leads to increased business spending, benefiting Ryder by providing more opportunities for leasing and service offerings. It stimulates the economy and supports customer investments. - Robert Sanchez(CEO)

Contradiction Point 2

Used Vehicle Pricing and Market Equilibrium

It involves expectations regarding used vehicle pricing and market equilibrium, which are key factors in Ryder's financial forecasting and strategic planning.

How do non-domicile CDL regulations affect operations? Are timing concerns a factor? - Ravi Shanker (Morgan Stanley)

2025Q3: Tractor pricing is showing signs of moving up, even with additional wholesaling. The used tractor market seems to be closer to equilibrium. While the low end of guidance reflects flat pricing, we anticipate a modest increase in used vehicle pricing in the fourth quarter. - Robert Sanchez(CEO)

How are you assessing residual truck value scenarios for the remainder of the year given cycle uncertainty? - Ravi Shanker (Morgan Stanley)

2025Q2: Tractor pricing is showing signs of moving up, even with additional wholesaling. The used tractor market seems to be closer to equilibrium. While the low end of guidance reflects flat pricing, we anticipate a modest increase in used vehicle pricing in the fourth quarter. - Robert Sanchez(CEO)

Contradiction Point 3

Earnings Growth Drivers

It highlights differing perspectives on the drivers of earnings growth, which are crucial for investor understanding of the company's financial outlook.

What are the earnings growth drivers for next year? Are there headwinds? - Scott Group (Wolfe Research)

2025Q3: Contractual earnings growth expected. Supply chain sales have been strong. Transactional sales muted due to freight market softness. When freight cycle turns, rental and used vehicle sales could boost earnings. - Robert Sanchez(CEO)

What are your growth strategies for international businesses? - Unidentified

2025Q1: We are seeing strong demand across Asia, Latin America, and Europe. In China, we are expanding our infrastructure and capabilities, with an emphasis on building out our last-mile capacity. - Greg St. Georges(CIO)

Contradiction Point 4

Impact of CDL Regulations

It shows differing assessments of the impact of CDL regulations on the business operations and driver market, which could influence strategic planning and resource allocation.

How do non-domicile CDL regulations affect operations? Are timing concerns present? - Ravi Shanker (Morgan Stanley)

2025Q3: Estimated impact is 5% of driver market. Tightening would be beneficial for dedicated and leasing businesses. Improvements in demand should occur as market tightens for drivers. - Robert Sanchez(CEO)

What are your growth strategies for international businesses? - Unidentified

2025Q1: Our international businesses are a significant part of our growth strategy. We are seeing strong demand across Asia, Latin America, and Europe. - Greg St. Georges(CIO)

Contradiction Point 5

Private Fleet Growth Trends

It indicates differing views on the trends and expectations for private fleet growth, which can impact long-term strategic planning and market positioning.

What are the structural trends in private fleet growth and how long will they last during the upcycle? - Ravi Shanker (Morgan Stanley)

2025Q3: We've seen private fleets defleeting over the last two to three years, likely reaching the tail end. Fleets ordered during COVID were more than needed, leading to defleeting. Private fleets are expected to grow with the upcycle. - Robert Sanchez(CEO)

What are your growth strategies for international businesses? - Unidentified

2025Q1: Our international businesses are a significant part of our growth strategy. We are seeing strong demand across Asia, Latin America, and Europe. - Greg St. Georges(CIO)

Q&A:

• Question from Scott Group (Wolfe Research): How will CDL regulations impact Ryder's business — exposure across lease, rental, dedicated, and potential pressure on used truck pricing?
  Response: A tighter driver market is likely, which should favor outsourcing and benefit Ryder's dedicated business; Ryder has limited direct exposure to the affected drivers.

• Question from Scott Group (Wolfe Research): Outlook for 2026 earnings growth — drivers and headwinds?
  Response: Expect contractual earnings growth and realization of remaining strategic-initiative benefits (majority of the $150M run-rate), with supply chain sales driving 2026 growth and transactional rental/used gains depending on timing of a freight-cycle upturn.

• Question from Scott Group (Wolfe Research): What is in guidance for fourth-quarter gains and how much cushion remains on residuals before depreciation changes are needed?
  Response: Q4 gains expected similar or modestly better than Q3; pricing would need to decline ~8% to reach the bottom end of residual sensitivity, and management is not planning residual/depreciation assumption changes now.

• Question from Ben Moore (Citi): With used-gain pressure and potential truck tariffs, could higher new-truck pricing and USMCA sourcing be net positive for Ryder?
  Response: Impact is uncertain, but higher new-truck prices are expected to be passed into lease rates and should support used-truck values over time; Ryder only buys trucks when leases are signed.

• Question from Ben Moore (Citi): As mix shifts to supply chain and dedicated, will Ryder trend to lower leverage targets aligned with peers?
  Response: No near-term change — leverage will remain in the 2.5–3x target range and is expected to move up during an upcycle as fleet spending ramps, so no immediate plan to lower the target range.

• Question from David Michael Zazula (Barclays): Supply chain showed headwinds this quarter — were these temporary and will revenue offset e‑commerce network performance issues? Also, SelectCare volatility?
  Response: Headwinds (higher medical costs, account-specific e‑commerce productivity misses, move/shutdown costs) are largely temporary; optimization should drive improvement into 2026 and SelectCare transactional activity should normalize in Q4.

• Question from Ravi Shanker (Morgan Stanley): Timing and magnitude of non-domicile CDL impact — how fast will second-order effects reach Ryder and when?
  Response: Estimated up to ~5% capacity impact over a multi-year period rather than overnight; tightening typically increases outsourcing demand and benefits dedicated and leasing over time.

• Question from Ravi Shanker (Morgan Stanley): Structural trends in private-fleet growth and durability through the upcycle?
  Response: Private fleets have been defleeting over the past 2–3 years and management believes that process is nearing its tail end, which could stabilize and benefit Ryder's lease and dedicated businesses.

• Question from Jeff Kauffman (Vertical Research Partners): How will bonus depreciation flow through the financials and the $200M benefit?
  Response: Bonus depreciation is a cash tax timing benefit of about $200M annually; it provides cash flow support but does not change operating margins or the tax rate.

• Question from Jordan Robert Alliger (Goldman Sachs): Is the e‑commerce productivity miss isolated to Q3 and can supply chain hold margins while absorbing new volumes from a strong pipeline?
  Response: Q4 will include continued optimization costs but those are expected to set up a rebound in 2026; management expects to maintain the segment's high-single-digit margin targets as new business scales.

• Question from Harrison Ty Bauer (Susquehanna Financial Group): Could the peak-to-trough earnings opportunity be more than $200M if rebased to 2025?
  Response: Yes — the current trough is deeper than 2024, so peak-to-trough opportunity may exceed $200M, but additional fleet investment will be necessary to capture the full upside.

• Question from Brian Patrick Ossenbeck (JPMorgan Chase & Co.): Can you clarify rental demand trends (seasonality vs. actual) and whether the e‑commerce productivity miss was account-specific?
  Response: Rental demand was slightly below seasonal (~1%); pure rental was flat YoY while lease-customer rental demand remains muted; the e‑commerce productivity miss was a one-off tied to specific accounts.

• Question from Ben Moore (Citi): How are Ryder's tech incubator and AI investments (Ryder Share/Ship/Guide) contributing to SCS sales and operations?
  Response: Customer-facing tech and GenAI deployments are differentiating Ryder in SCS, driving sales activity and improving transportation optimization, service levels, and freight-bill audit efficiency.