Transportation and logistics solutions provider Ryder System, Inc. (R) reported a lower fourth-quarter profit on Wednesday, as revenues declined across-the-board, reflecting the soft demand for freight shipments. Ryder's shares plunged more than 8% in the morning session following the company's first-quarter earnings guidance, which came in below the current estimates of Street analysts.
The Miami, Florida-based company's fourth-quarter net earnings decreased to $8.2 million or $0.15 per share from $10.6 million or $0.19 per share a year ago.
On average, 11 analysts polled by Thomson Reuters estimated earnings of $0.47 per share for the quarter. Analysts' estimates typically exclude special items.
Total fourth-quarter revenue from continuing operations decreased 7% to $1.25 billion from $1.34 billion in the comparable quarter of 2008. Total revenue was adversely impacted by lower fuel volumes, partially offset by favorable foreign exchange rate movements.
In the preceding third quarter, Ryder's net income decreased to $24 million or $0.43 per share from $70.2 million or $1.24 per share in the same quarter last year. Total revenue from continuing operations for the third quarter declined to $1.26 billion, down 20% from $1.58 billion in the year-ago period.
Commenting on the company's performance, Greg Swienton, chief executive officer of Ryder, said, "We continued to manage the business effectively through the challenges of the prolonged multi-year freight recession which extended through the fourth quarter. Fleet Management Solutions customers continued to cope with reduced freight activity by downsizing their fleets, primarily at the end of their contractual term."
" There were a number of areas that showed some positive improvement. Lease miles per vehicle continued to stabilize and we continued to maintain pricing levels on new lease sales in line with return targets. While rental demand remained soft, utilization improved due to our fleet right-sizing actions. Used vehicle sales inventories were reduced from third quarter levels and are in line with our targets. Used vehicle pricing was lower, although more stable in the second half of the year. As expected, Supply Chain Solutions automotive volumes were lower compared with the prior year." Swienton added
Earnings per share from continuing operations for the fourth quarter plunged to $23.7 million or $0.43 per share from $50.5 million or $0.91 per share in the year-earlier period. Excluding items, comparable earnings from continuing operations declined to $22.2 million or $0.41 per share from $61.6 million or $1.10 per share in the prior-year quarter. The drop in comparable earnings from continuing operations, excluding items, was 64%, with per share earnings declining 63%.
Earnings from continuing operations for the current quarter included a net benefit of $1.5 million, or $0.02 per share, related to changes in Canadian income tax laws, which was partially offset by restructuring charges and other items. Year-earlier earnings from continuing operations included a net charge of $11.1 million, or $0.19 per share, related to restructuring charges and other items, which was partially offset by the reversal of contingent income tax accruals.
Fourth quarter results reflect significantly lower pre-tax earnings in the Fleet Management Solutions, or FMS, segment. The decline was driven by decreased global results in full service lease, higher pension expense, reduced commercial rental performance, and lower results from used vehicle sales operations. Higher pension expense reduced earnings by $0.18 per share, primarily impacting the FMS segment. Ryder's earnings in Supply Chain Solutions, or and Dedicated Contract Carriage segments were impacted to a lesser extent by higher self-insurance costs.
During the third quarter of 2009, Ryder ceased customer operations in all South American markets and part of Europe. The company also ceased Supply Chain Solutions operations in all of Europe during the fourth quarter. Results of these operations were reported as discontinued operations. Earnings from discontinued operations totaled losses of $0.28 per share in the fourth quarter, compared to losses of $0.72 per share in same period last year. Results from discontinued operations for 2009 included accumulated foreign currency translation losses of $14.2 million after tax or $0.26 per share associated with the liquidation of investments in certain discontinued operations.
Operating revenue from continuing operations, which excludes revenue from FMS fuel and all subcontracted transportation, was $1.02 billion for the quarter, down 6% from $1.09 billion in the year-earlier period. Operating revenue comparisons included a favorable fourth quarter foreign exchange impact of 1%.
Segment wise, revenue from Fleet Management Solutions dropped 8% to $900.2 million from $977.1 million in the similar quarter of 2008. Fuel services revenue in the fourth quarter decreased 16%, mainly on reduced gallons pumped at Ryder's fuel service centers and, to a lesser extent, lower fuel prices.
In the Supply Chain Solutions segment, fourth quarter revenue decreased 5% to $302.1 million from $319 million in the comparable period in 2008. Revenue declined primarily due to lower automotive and other freight volumes, partially offset by favorable foreign exchange rate movements.
In the Dedicated Contract Carriage segment, fourth quarter revenue dropped 6% to $119.3 million from $126.2 million in the fourth quarter of 2008. Revenue decreased due to the non-renewal of customer contracts and reduced freight volumes.
Restructuring and Other Items
Pre-tax restructuring and other items from continuing operations in the fourth quarter totaled $2.7 million, or $0.05 per share, consisting principally of an impairment charge related to an international supply chain facility that is expected to be sold in the first quarter of 2010.
Pre-tax restructuring and other items from continuing operations in the fourth quarter of 2008 totaled $23.1 million or $0.33 per share. The company recognized a pre-tax restructuring charge of $11.2 million associated with a workforce reduction of 700 positions in early 2009. In 2008, the company also recognized a non-cash, pre-tax impairment charge of $11.9 million related to goodwill write-down associated with the European FMS segment and other long-term international assets.
Ryder had operating cash flow from continuing operations of $1 billion in 2009, down 20% from $1.25 billion in the same period of 2008, primarily due to lower cash-based earnings and voluntary pension contributions.
For full year 2009, Ryder's net earnings dropped to $61.9 million or $1.11 per share from $199.9 million or $3.50 per share in the year-earlier period. Net earnings included the impact of discontinued SCS operations in South America and Europe. Total revenue from continuing operations for the full year declined 19% to $4.89 billion from $6 billion in 2008. Operating revenue from continuing operations for 2009 was $4.06 billion, down 11% from $4.59 billion in 2008.
Looking ahead to the first quarter of 2010, the company announced a comparable earnings forecast of $0.17 to $0.22 per share, compared to $0.30 in the same period of 2009. These expected results reflect the impact of lower full service lease fleet levels because of customer fleet downsizings in the prior year, partially offset by improved commercial rental performance, better used vehicle sales operations, and stronger SCS results, Ryder said.
On average, analysts currently expect earnings of $0.35 per share for the first quarter of fiscal 2010. First quarter revenues are estimated at $1.20 billion by analysts at present.
For full year 2010, Ryder forecasts earnings in the range of $1.80 to $1.95 per share. Full year comparable earnings were $1.70 per share in 2009. Earnings growth is expected from improved commercial rental performance, productivity initiatives, better used vehicle sales operations, stronger SCS results, lower annual pension expense and the benefit of 2009 stock repurchases, Ryder said.
Ryder expects total revenue for the full year 2010 at $4.9 billion, which is flat compared with 2009. Operating revenue is forecast to be $4 billion, compared with $4.1 billion in 2009. For full year 2010, analysts, on a consensus, currently anticipate earnings of $2.11 per share on revenues of $4.87 billion.
Commenting on the company's outlook, Swienton said, "We expect 2010 economic conditions to be fairly stable, with some modest improvement in the second half of the year. Headwinds that Ryder faces in 2010 include the cumulative negative impact of full service lease customer fleet downsizing decisions over the past year, as well as added vehicle depreciation expense. To help mitigate these negative factors, we are implementing productivity initiatives and other process enhancements. Ryder enters 2010 properly situated for marketplace demand, with both rental and used vehicle sales fleets at appropriate levels. As a result of these fleet right-sizing actions, we expect improved returns in both the commercial rental and used vehicle sales product lines of our Fleet Management Solutions business. Despite the moderate economic outlook, we expect to deliver improved returns in our Supply Chain Solutions business, resulting from recovering automotive volumes, new initiatives and strategic decisions undertaken in 2009."
Ryder anticipates 2010 capital expenditures at $1.1 billion, including an estimated $270 million to refresh the commercial rental fleet. Cash from operations is forecast to be $1 billion with total cash generated of $1.3 billion and free cash flow of $250 million in 2010.
R is losing $3.18 or 8.54%, and is trading at $34.15 on a volume of 1.86 million shares on the New York Stock Exchange.
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