Ryder System: A High-Conviction Buy for Shareholders Seeking Double-Digit Earnings Growth in a Resilient Logistics Sector

The logistics and transportation sector has long been a barometer of macroeconomic health, but in 2025, it is also a battleground for innovation, margin resilience, and capital discipline. Among the contenders, Ryder System (R) stands out as a rare combination of operational excellence and strategic foresight. With a transformed business model, robust free cash flow generation, and a valuation that defies its industry peers, Ryder is not just surviving the current cycle—it is thriving. For income and growth investors, the case for Ryder is compelling, rooted in its ability to harness secular trends while delivering double-digit earnings growth.

Operational Execution: The Engine of Margin Resilience

Ryder's 2024 results underscore its operational discipline. Despite headwinds in the rental and used vehicle sales segments, the company delivered $12.6 billion in revenue, a 7% year-over-year increase, with operating revenue (non-GAAP) rising 8%. The Supply Chain Solutions (SCS) and Dedicated Transportation Solutions (DTS) segments were the stars, with SCS reporting a 44% surge in earnings before taxes (EBT) and DTS growing revenue by 37%—driven by the Cardinal Logistics acquisition and operational efficiencies.

The Fleet Management Solutions (FMS) segment, while challenged by weak rental demand, demonstrated resilience through cost controls and lease pricing adjustments. This adaptability is critical in a sector where cyclical volatility is the norm. Ryder's ability to pivot—optimizing its omnichannel retail network, reducing maintenance costs, and leveraging AI-driven fleet utilization—has insulated its margins better than peers.

Strategic Capital Deployment: Fueling Growth and Shareholder Returns

Ryder's capital allocation strategy is a masterclass in balancing reinvestment and returns. In 2025, the company raised its free cash flow (FCF) forecast to $900 million–$1 billion, driven by reduced capital expenditures and tax bonus depreciation. This FCF is being funneled into high-return initiatives, such as fleet electrification and AI-powered logistics platforms, while also funding a 12% dividend increase and aggressive share repurchases. Since 2021, Ryder has reduced its share count by 21%, a testament to its commitment to enhancing shareholder value.

The company's debt-to-equity ratio of 251% (as of June 2025) sits comfortably within its target range of 250%–300%, ensuring flexibility to capitalize on growth opportunities. Meanwhile, its price-to-free-cash-flow (P/FCF) ratio of 12.81 (June 2025) is a stark improvement from 51.65 in late 2024, reflecting stronger cash flow generation and investor confidence.

Valuation: A Discount to Intrinsic Value

Ryder's valuation metrics paint a picture of a company undervalued by the market. Its P/E ratio of 14.9 is nearly half the industry median of 26.2, while its shareholder yield of 7.2% dwarfs the sector average of 0.7%. Even when compared to peers like Avis Budget Group (CAR) and Werner Enterprises (WERN), Ryder's valuation is more attractive. For instance, Avis has a lower P/E (7.7) but a bloated EV/EBITDA (15.8), while Werner's P/E (48.9) is unsustainable for a company with its earnings volatility.

Ryder's free cash flow growth—projected to nearly triple in 2025—further justifies its valuation. At a P/FCF of 12.81, the stock trades at a premium to the industry median but remains attractive given its structural improvements in earnings and cash flow. The company's focus on contractual revenue streams (which now dominate its business) and sustainability-driven fleet modernization positions it to outperform in both upturns and downturns.

Secular Tailwinds: Why the Logistics Sector is a Winner

The long-term growth drivers for Ryder are not cyclical but structural. E-commerce expansion, supply chain fragmentation, and regulatory shifts toward sustainability are creating demand for flexible, tech-enabled logistics solutions. Ryder's investments in electric vehicle (EV) infrastructure, real-time tracking systems, and AI-driven route optimization align perfectly with these trends.

Moreover, the company's U.S.-centric model benefits from the country's underinvested infrastructure and rising demand for last-mile delivery. Unlike global peers exposed to currency and geopolitical risks, Ryder's focus on domestic markets provides a stable foundation for growth.

Investment Thesis: A High-Conviction Buy

For investors seeking a blend of income and growth, Ryder offers a rare combination:
1. Double-digit earnings growth from its contractual segments (SCS and DTS).
2. Robust free cash flow to fund dividends (yielding ~2.5% as of August 2025) and buybacks.
3. A valuation discount to intrinsic value, supported by strong cash flow growth and a resilient business model.

The risks? A prolonged freight downturn could pressure DTS margins, and used vehicle sales remain volatile. However, Ryder's diversified revenue streams and capital-light operating model mitigate these concerns.

Conclusion: A Core Holding for 2025 and Beyond

Ryder System is more than a logistics company—it is a masterclass in capital allocation and operational execution. Its ability to generate free cash flow, reinvest in high-return opportunities, and return capital to shareholders makes it a standout in a sector often plagued by margin compression. At current valuations, Ryder offers a compelling entry point for investors who recognize that the best logistics companies are those that can thrive in both calm and storm.

For those with a 3–5 year horizon, Ryder is not just a buy—it is a high-conviction core holding in a resilient, high-growth sector.