Lower fuel prices and a softening used truck market constrained fourth-quarter revenue growth at Ryder System, but demand for Ryder’s fleet and supply chain services remained strong.
Still, the vehicle lessor is lowering its expectations for 2016, planning to add fewer vehicles to its leased fleet, cutting back on “discretionary” costs and “modestly” reducing its workforce.
Ryder increased operating revenue, excluding fuel, by 7 percent year-over-year in the quarter. That increase would have been 9 percent, excluding the effect of currency exchange rates.
For the quarter, total revenue rose 1 percent to $1.67 billion. Full-year revenue dropped 1 percent to $6.6 billion. But the Miami-based company earned more from that revenue.
Comparable net earnings, accounting for one-time charges in the 2014 fourth quarter, rose 5 percent to $88.8 million. For the full year, comparable earnings rose 10 percent to $327.3 million.
Total revenue in its core fleet management division, which offers trucks for lease and rent, was flat year-over-year at $1.15 billion, but operating revenue rose 7 percent to $999.4 million.
Ryder ended 2015 with record lease fleet growth of 6,800 vehicles, but only plans to add 3,500 vehicles in 2016, anticipating a soft freight environment and weak used tractor market.
Ryder’s dedicated transportation business increased revenue 5 percent to $232.4 million and operating revenue 11 percent to $187.6 million on the back of new business and higher pricing.
The supply chain division saw total revenue drop 1 percent to $392.5 million, thanks in part to unfavorable foreign exchange rates. But operating revenue rose 4 percent to $322.1 million.
“We have assumed further deterioration in used vehicle pricing, with tractor pricing dropping by around 20 percent” from a first-half 2015 peak, Chairman and CEO Robert Sanchez said.
“Given the uncertainty around 2016 freight levels, we have also planned for lower rental demand and minimal rental capital spending, reducing our exposure in this transactional business,” he said.
Sanchez expects continued demand for outsourcing from shippers to drive contractual business in its leasing, dedicated and supply chain divisions, even if the U.S. economy grows slowly.
The company expects revenue for 2016 to rise 6 percent to approximately $7 billion.