Ryder Truck Rental Growth Hints at Freight Market Recovery
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Rental truck demand and lease miles per vehicle are starting to increase, indicating the freight demand cycle is turning upward, said Ryder System CEO Robert Sanchez.
Truck rental utilization is a key performance indicator for the fortunes of Ryder’s biggest business unit and for the health of the freight market in general, Sanchez told attendees of the Goldman Sachs Industrial and Materials Conference on Dec. 4.
Rental utilization is “typically where we see the first movement. If you think about it, when customers get to where they’re utilizing their base fleet, the first thing they’re going to do, they’re not going to go buy a truck, they’re going to come rent one. And that’s what we see first,” he told investors.
“So, we’ve been below our target,” Sanchez said. He said target utilization for Ryder’s truck fleet is 75% to 79%, while it had been in the low to mid 70s this year. “So, certainly off there,” he added. “Over the last couple of quarters, we have seen truck utilization improve seasonally, which we hadn’t seen last year. So, it does appear that we’re getting to where our fleet is beginning to get some leverage during this season,” he added.
Ryder offers truck rental opportunities at more than 400 locations, including single- and tandem-axle day cab tractors, tandem-axle sleeper tractors and electric semis.
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During the company’s third-quarter earnings call, Sanchez and Chief Financial Officer John Diez were not optimistic about the prospects for the rental and used vehicle sales market, part of the company’s largest division — Fleet Management Solutions.
Optimism about used truck sales is growing, though. “On the used truck side, even though pricing is still soft, we have seen over the last couple of quarters that the rate of [price] decline being mid-single to low-single digits. This seems to be beginning to bottom out,” Sanchez said.
October used Class 8 sales increased 10.7% year over year to 23,800 trucks from 21,500 units, according to the latest ACT Research data, as well as rising 9.7% from 21,700 in September.
Sanchez also sees improvement in another FMS indicator that Ryder keeps a very close eye on: lease miles per customer vehicle.
Sanchez
“We do track the number of miles that our lease fleet runs. We have a large fleet of commercial trucks with our customers. We have a total fleet of 250,000 commercial vehicles. About 160,000 of those are leased,” he said.
Lease miles per customer vehicle declined for 11 consecutive quarters until rising in the second quarter of 2024, he noted, adding that though it declined slightly in Q3, the most recent quarter is doing better.
“Given these indicators, at some point in ‘25, we would expect a freight market turnaround,” he said. “The truck rental business will improve. If it happens at the beginning of the year, of course, it is a very positive thing for ‘25; If it happens late into the year, it is less positive.”
Nonetheless, Ryder revenue continues to increase even in the freight market downturn, as does the company’s dividend, Sanchez said, partly as a result of contractual lease improvements and partly as a result of the acquisition of Cardinal Logistics.
Ryder acquired Concord, N.C.-based Cardinal on Feb. 1 for an undisclosed sum. Prior to the deal, Cardinal Logistics ranked No. 51 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 63 on the TT100 list of the continent’s largest logistics companies.
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Miami-based Ryder ranks No. 6 on the for-hire TT100 and No. 8 on the logistics TT100.
Between now and the next earnings cycle peak, Ryder expects $350 million of increased earnings opportunities to open up, Sanchez told investors at the Goldman Sachs event in New York.
Some $200 million of that will be increased cyclical improvements in truck fleet rental and used truck prices, he said, with the other $150 million a combination of contractual earnings improvements.
Around $20 million of the latter will be lease deal improvements, he said, adding that the company has identified some $50 million in maintenance cost reductions while expecting $40 million to $60 million in synergies from the Cardinal acquisition.
As part of a long-term turnaround program that began in 2019 focused on derisking its operations, Ryder previously slashed $100 million from its truck maintenance costs, Sanchez said.
