Ryder System Inc. (NYSE: R) reported record second-quarter total and operating revenue across its fleet management, dedicated transportation and supply chain segments. But traders pummeled its shares because of weakness in used heavy-duty truck sales and rentals.
Company shares traded at $53.54, down $5.57 per share, or 9.51 percent at 1:00 p.m. EDT Tuesday (July 30).
Second-quarter earnings per share were down 4 percent to $1.40 from $1.46 in the same period a year ago because of lower demand for both sleeper and day cab tractors. Net earnings were $73.9 million compared with $76.8 million in the second quarter of 2018.
Record second-quarter total revenue was up 7 percent to $2.2 billion. Record second-quarter operating revenue was up 11 percent to $1.8 billion.
"Despite a softer freight environment compared to 2018, we delivered double-digit operating revenue growth driven by strong performance in our contractual dedicated transportation, supply chain and lease businesses," Ryder Chairman and CEO Robert Sanchez said in a statement.
On the company's earnings call, Sanchez told analysts that lower sales of used tractor cabs and slower rentals hit the company in June. That led Ryder to slash prices by 10 percent for vehicles in inventory. He said many of those will sell at wholesale, though he hopes for retail demand because Ryder would make a larger profit.
Ryder's experience tracks with slower orders for new trucks dating to November 2018 while manufacturers work through a backlog of new heavy-duty trucks ordered in 2018.
"Data that support our forecast of an impending market correction continue to mount with the continued building of new equipment inventories that will require right-sizing in 2020," said Kenny Vieth, president and senior analyst at ACT Research.
Full-year guidance lowered
Ryder reduced its full-year per share forecast to a range of $5.50 to $5.80 from $6.05 to $6.35 because it expects a weaker market for used Class 8 trucks, which represent about one-third of Ryder's inventory. Sanchez said exports are low because of the strength of the U.S. dollar among world currencies.
"It's hard to tell where the market will settle in the next couple of months," Sanchez said.
Most forecasts for-hire trucking companies and other fleets look for a continued softening in freight demand. According to ACT Research, trucking is in a technical recession, defined as two consecutive quarters of negative growth.
Sanchez said Miami-based Ryder is on track to achieve its multi-year $75 million maintenance cost-savings initiative. COOP by Ryder, an asset sharing platform for commercial vehicles, is getting positive consumer feedback following an expansion into Florida earlier this year.
Ryder's last-mile e-commerce fulfillment solution with new facilities in California, Pennsylvania and Texas can reach 95 percent of the nation's consumers with two-day delivery.
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