3Q 2026 Ryder Earnings Conference Call - RYDER SYSTEM INC

Explicit Guidance:

• 2026 Full-Year Comparable EPS: Increased to a range of $14.85 to $15.05 (previously $13.40–$14.80), driven by stronger Q3 performance and incremental Q4 benefits.
• 2026 Full-Year Free Cash Flow: Maintained guidance of $700 million to $800 million.
• 2026 Return on Equity (ROE): Increased to a range of 18% to 19%.
• Q4 2026 Comparable EPS: Forecast range of $4.25 to $4.45 (compared to $3.59 in Q4 2025).
• 2026 Capital Expenditures: Full-year forecast of $2.4 billion, broken down into $1.7 billion for lease (down from prior forecast) and $500 million for rental (up $300 million from prior forecast). Net capital expenditures expected at approximately $1.9 billion.
• 2026 Used Vehicle Sales Proceeds: Expected $500 million, in line with prior year.
• 2027 Outlook: Management anticipates 10% increase in the rental fleet in the second half of 2026, with meaningful fleet growth expected across lease, dedicated, and rental segments in 2027 as new equipment arrives.
• Strategic Initiative Benefits: Expecting $70 million in incremental benefits in 2026 (total multi-year benefits >$170 million by end of 2026); previously realized $100 million in 2024–2025.
• Cyclical Upturn Benefits: Expecting $40 million in 2026 (up from $20 million), with potential benefits of $250 million or more by the next cycle peak (2027–2028) driven by rental/used vehicle normalization and higher volumes.

Business-Segment Outlook:

• Fleet Management Solutions (FMS): Expect profitability to remain in the low teens (~13.2%); pricing and utilization continue to improve. Used vehicle pricing increased 19% for tractors and 5% for trucks year-over-year. Retail channel share expected to rise from 61% (Q3 2026) to the 70s in 2027.
• Rental: Utilization at 77% in Q3, expected to remain near this level in Q4 2026. Rental pricing up 4% YoY and 15% sequentially for tractors. Fleet count expected to increase 8% sequentially in Q4 and 10% in H2 2026, with a focus on tractor class growth.
• Lease: Net sales activity accelerating; fleet count expected to "flattening to uptick" in Q4, with meaningful growth in 2027. Top-line growth expected to accelerate to mid-to-high single digits in 2027.
• Supply Chain: EBT target remains high single digits (~8.1%); revenue grew 9% in Q3. Strong pipeline in CPG, industrial, healthcare, and retail sectors; automotive loss expected to be offset by new business ramping.
• Dedicated: Pipeline healthy; seeing increased customer demand for specialized dedicated capacity and private fleet conversions due to driver/insurance cost pressures. Revenue expected to grow as spot rates stabilize and fleet conversions accelerate.

Market and Competitive Outlook:

• Freight Market: Market is in "early stages of recovery" with conditions improving. Used vehicle inventories declining, keeping spot rates elevated and supporting pricing.
• Used Vehicle Sales: Retail mix shift driving margin expansion; expected to benefit from continued thinning inventory and elevated spot rates in 2027.
• Pricing Environment: Pricing discipline maintained across lease, rental, and dedicated segments. Rental pricing expected to strengthen further as the cycle upturn matures.
• Competitive Dynamics: Shift in customer behavior from spot market to contractual solutions due to driver retention challenges and rising insurance/capital costs. Dedicated pipeline seeing customers trade cost for service reliability.
• Utilization Trends: Lease miles per unit increasing YoY and sequentially; commercial rental utilization strong at 77%, indicating improved customer fleet efficiency.

Macro / Industry Outlook:

• Driver Labor Market: Expecting mid-single-digit wage increases in select markets; contracts include inflationary adjusters and driver wage indices to mitigate pass-through lag.
• Interest Rates: Management remains on pace to hit ROE targets of 18–19% in the current cycle, with a trajectory to reach low 20s by cycle peak despite current rate environment.
• EPA Regulations: 2027 technology changes (non-conformance penalties) leading to expected price increases; no significant "pre-buy" surge observed in Q3, though customers are advised to order early due to rising costs.
• Geopolitics/Macro: Management acknowledges geopolitical and macroeconomic factors remain variables affecting the "pace and durability" of the freight recovery, but views the current environment as improving.

Strategic Initiatives:

• Technology: Embedding agentic AI into customer platforms (RiderShare, RiderGuide) and enhancing FMS customer service/roadside assistance.
• Operational Efficiency: Deploying automation and robotics in warehouses to drive efficiency.
• Capital Allocation: ~$14 billion capital available for deployment over the next three years; ~50% for flexible deployment (organic growth CapEx, acquisitions, share repurchases).
• Acquisitions: Open to opportunistic, value-creative M&A, particularly in supply chain and capability expansion, prioritizing organic fleet growth first.
• Fleet Rebalancing: Increasing rental fleet composition, specifically tractor class orders placed to meet anticipated 2027 demand; ending rental fleet to be ~10% larger in H2 2026 vs prior year.

Risks and Headwinds to Outlook:

• Macro Volatility: Geopolitical events and broader economic conditions could alter the pace or durability of the freight market recovery.
• EPA Uncertainty: Pricing impact beyond non-conformance penalties (post-2027 technology) remains unclear until mid-2027.
• Wage Inflation: Potential for localized wage pressures in select markets despite contractual protections, with a "lag" in passing costs to customers.
• Market Cycle Risk: Cyclical benefit realization ($40 million in 2026, $250M+ by peak) is contingent on the "early stages of recovery" evolving into full acceleration; rental market acceleration is a key catalyst.
• Inventory Risks: Used vehicle inventory levels are near the lower end of targets; continued sell-through depends on spot rates remaining elevated and retail mix stability.

Management Tone on the Future:

• Confidence Level: Highly confident in the "transformed model" and "balanced growth strategy." Management emphasizes outperforming prior cycles even at this early stage of recovery.
• Cycle View: Views current market as an "early upturn" with "inflection points" in rental and used vehicle sales; expects acceleration in 2027 as fleet additions materialize.
• Strategic Confidence: Repeatedly notes that earnings growth is driven by "structural changes" (strategic initiatives) rather than just the cycle, providing a "solid foundation" for future value creation.
• Financial Health: Emphasizes de-levering balance sheet and generating strong operating cash flow ($2.6 billion forecasted for 2026) to fund growth and returns.

Miscellaneous:

• Share Count: 2026 EPS increase partially driven by share repurchases; future repurchases remain a key use of flexible capital once growth CapEx is funded.
• Segment Mix: Shift toward asset-light businesses (Supply Chain and Dedicated) now comprising 60% of 2026 revenue (up from 44% in 2018), enhancing cash flow durability.
• Customer Challenges: Customers facing difficulty attracting drivers, securing capacity, and rising insurance costs, which reinforces demand for Rider's end-to-end solutions.