Ryder System revised its earnings guidance for the third quarter and full-year 2015 due to lower than expected earnings growth in its Fleet Management Solutions (FMS) business segment.
Article continues below
The revision is due to a temporary execution issue, related to record fleet growth, which the company expects to resolve during the fourth quarter, and less robust demand conditions in used vehicle sales.
Performance in Ryder’s Dedicated Transportation Solutions (DTS) and Supply Chain Solutions (SCS) business segments is expected to remain generally in line with the company’s previous forecast.
Commercial rental demand remained robust and rental revenue grew by 7% in the third quarter. Earnings, however, were impacted by a greater than planned number of out-of-service vehicles during the quarter, as maintenance technicians were supporting new levels of fleet growth across all product lines.
The elevated level of out-of-service vehicles resulted in lower than expected rental utilization. Rental utilization remained solid at 76.4% in the third quarter, but was below expectations, reflecting out-of-service vehicles. Rental pricing grew by 2% in the third quarter, as compared with the company’s prior forecast of 3%, as a greater percentage of the rental fleet was used to satisfy lease customers whose vehicles were down for service.
These vehicles would have otherwise been available to generate rental revenue. The company anticipates fourth quarter rental demand to be generally consistent with prior expectations. Earnings, however, will be impacted as the company resolves the out-of-service vehicle issue in the fourth quarter.
Used vehicle sales results also impacted earnings in the quarter, particularly in the month of September. The impact was due to 7% fewer than anticipated used power vehicles sold in the U.S., as well as moderating price growth.
Used truck inventories remained relatively unchanged and at the low end of the company’s target range. The company expects fourth quarter results to continue to be impacted by reduced used truck sales volumes and lower price expectations that are now consistent with prior-year pricing.
Overall revenue growth remains strong and in line with Ryder’s prior expectations for the third quarter. The company continued to realize strong sales in full service lease and anticipates lease fleet growth for the full year to be at the high end of the company’s previous forecast of 5,000 to 6,000 vehicles.
Ryder also sees continued strong customer interest in the new on-demand maintenance product following the official launch in August. Additionally, DTS and SCS are expected to deliver solid earnings generally in line with the company’s previous third quarter forecast. ■