Ryder (R) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Oct. 22, 2026

CALL PARTICIPANTS

• Vice President, Investor Relations - Calene Candela
• Chief Executive Officer - John Diez
• Executive Vice President and Chief Financial Officer - Cristy Gallo-Aquino
• President of Fleet Management Solutions - Tom Havens
• President of Supply Chain Solutions and Dedicated Transportation Solutions - Steve Sensing

TAKEAWAYS

• Operating Revenue -- $2.8 billion, representing 6% growth driven by contractual revenue increases in Supply Chain Solutions and Fleet Management Solutions.
• Comparable EPS -- $4.33, up 21% from $3.57 in the prior year, reflecting higher earnings in Fleet Management Solutions and the impact of share repurchases.
• Free Cash Flow -- $992 million, an increase from $496 million in the prior year, primarily due to lower year-to-date capital expenditures and higher operating cash flow.
• Return on Equity -- 18% for the quarter, compared to 17% in the prior year, which aligns with the company's expectations for this stage of the freight cycle.
• FMS Earnings Before Tax -- $177 million, a 21% increase reflecting improved used vehicle sales pricing and commercial rental utilization.
• FMS Operating Margin -- 13.2% as a percentage of operating revenue, which meets the company's long-term target of low teens.
• SCS Operating Revenue -- $1.1 billion, up 9% due to new business wins and higher volumes in e-commerce fulfillment, partially offset by lost business in the automotive sector.
• DTS Operating Revenue -- $455 million, a 1% decline resulting from a lower fleet count that was partially offset by higher pricing.
• Rental Utilization -- 77%, up 700 basis points year over year on a 12% smaller average fleet.
• Used Vehicle Sales Pricing -- Up 19% for tractors and 5% for trucks year over year, with tractors benefiting from a shift toward higher-margin retail sales.
• Used Vehicle Inventory -- 7,300 units at quarter end, representing the lower end of the company's target range and a decline from 8,500 units last year.
• Full Year Comparable EPS Guidance -- $14.85 to $15.05, raised from the previous range of $14.40 to $14.80 to reflect third quarter performance and improved market conditions.
• Capital Expenditures Forecast -- $2.4 billion for the full year, with rental fleet investments increased to $500 million to capture expected demand in 2027.
• Strategic Initiative Benefits -- $70 million in incremental benefits expected for 2026, contributing to a multiyear program targeting $170 million in total benefits by year end.
• Debt-to-Equity -- 242% at quarter end, down from 250% at the end of 2025 and slightly below the target range of 250% to 300%.
• Cyclical Upturn Benefit -- $40 million expected in 2026, an increase from the previous forecast of $20 million, driven by used vehicle sales and rental performance.
• Q4 Comparable EPS Guidance -- $4.25 to $4.45, which would be an increase from $3.59 in the fourth quarter of the prior year.
• Shareholder Returns -- $485 million returned to shareholders through dividends and share repurchases year to date.
• GAAP EPS Guidance -- $9.75 to $9.95 for the full year, including estimated non-cash pension settlement charges of $4.30 per share.
• ChoiceLease Fleet Status -- End-of-period fleet count of 139,800 units, reflecting three consecutive quarters of positive net sales activity despite a 2% year-over-year decline in average fleet.

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RISKS

• John Diez stated, "geopolitical and macroeconomic factors remain key variables affecting the pace and durability of the recovery," noting these as variables for the current market outlook.
• Cristy Gallo-Aquino noted that Supply Chain Solutions results were impacted by "productivity of new business ramping up and lower automotive results," which partially offset gains in e-commerce.
• Steve Sensing indicated that the company is observing localized wage pressure, noting a mid-single-digit wage increase for drivers in specific regions.

SUMMARY

Ryder System, Inc. (NYSE:R) reported third quarter results featuring 21% growth in comparable earnings per share and a subsequent raise to its full-year 2026 guidance. Management stated that the company's balanced growth strategy has shifted its revenue mix toward asset-light segments, with Supply Chain Solutions and Dedicated Transportation Solutions expected to represent 60% of total 2026 revenue. The company reported that its contractual portfolio, which accounts for over 90% of revenue, provided resilience while transactional businesses in used vehicle sales and commercial rental showed signs of cyclical improvement. Management confirmed that strategic initiatives are on track to deliver $170 million in cumulative benefits by the end of 2026.

• The company is embedding agentic AI into its RyderShare and RyderGyde platforms to enhance proactive supply chain capabilities and roadside assistance effectiveness.
• Management expects the rental fleet to grow 8% sequentially in the fourth quarter following significant tractor orders placed to meet anticipated 2027 demand.
• Lease miles per unit increased both year over year and sequentially, which management cited as an indicator of higher fleet utilization by lease customers.
• Tom Havens stated, "it's pretty well understood at this point that price increases are coming in 2027," in reference to the upcoming EPA engine technology mandates.
• Dedicated Transportation Solutions reported that 70% to 80% of its business is highly specialized, focused primarily on private fleet conversions rather than standard truckload capacity.
• Management identified a potential cyclical upturn benefit of $250 million or more at the next cycle peak, primarily driven by the recovery of rental and used vehicle sales.

INDUSTRY GLOSSARY

• Agentic AI: Artificial intelligence systems designed to operate autonomously to accomplish specific tasks or goals within a supply chain environment.
• Asset-light: A business model that focuses on providing services and technology with minimal ownership of physical assets like trucks or warehouses relative to revenue.
• ChoiceLease: Ryder's contractual full-service leasing product for commercial vehicles.
• DTS (Dedicated Transportation Solutions): A segment providing specialized equipment, maintenance, and drivers for a customer's specific transportation needs.
• FMS (Fleet Management Solutions): A segment providing leasing, maintenance, rental, and used vehicle sales services.
• RyderShare: A digital platform providing real-time visibility and collaboration tools for supply chain participants.
• SCS (Supply Chain Solutions): A segment providing distribution management, transportation management, and e-commerce fulfillment services.
• SelectCare: A contractual service where Ryder provides maintenance for vehicles owned by the customer.

Full Conference Call Transcript

Operator: Good morning, and welcome to the Ryder System third quarter 2026 earnings release conference call. All lines are in a listen-only mode until after the presentation. Today's call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce Ms. Calene Candela, Vice President, Investor Relations for Ryder. Ms. Candela, you may begin.

Calene Candela: Thank you. Good morning, and welcome to Ryder's third quarter 2026 earnings conference call. I'd like to remind you that during this presentation, you'll hear some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in economic, business, competitive, market, political, and regulatory factors.

More detailed information about these factors and a reconciliation of each non-GAAP financial measure to the nearest GAAP measure is contained in this morning's earnings release, earnings call presentation, and in Ryder's filings with the Securities and Exchange Commission, which are available on Ryder's website. Presenting on today's call are John Diez, Chief Executive Officer, and Cristy Gallo-Aquino, Executive Vice President and Chief Financial Officer. Additionally, Tom Havens, President of Fleet Management Solutions, and Steve Sensing, President of Supply Chain Solutions and Dedicated Transportation Solutions, are on the call today and available for questions following the presentation. At this time, I'll turn the call over to John.

John Diez: Good morning, everyone, and thanks for joining us. The Ryder team delivered our eighth consecutive quarter of comparable earnings per share growth. Strong results were driven by consistent execution on our strategic initiatives and improving performance in used vehicle sales and rental. I'll begin today's call with an update on our balanced growth strategy, followed by key highlights from our third quarter performance. Cristy will review our segment performance, capital spending, and capital deployment capacity. I'll then review our outlook for 2026. Let's begin with a strategic update. Consistent execution on our balanced growth strategy has created a more durable earnings and cash flow profile, enabling us to outperform prior cycles.

The solid foundation built by the Ryder team reflects actions taken to de-risk the portfolio, enhance returns and cash flow, and shift to a less capital-intensive, more resilient business mix. This foundation continues to evolve and strengthen as we execute strategic priorities that create value for customers and shareholders. Operational excellence is where we stand out and what enables us to leverage our full end-to-end capabilities to solve our customers' toughest logistics and transportation challenges. Investing in customer-centric innovation that enables proactive supply chains and gives our customer a competitive advantage remains a key priority. We're enhancing the capabilities and driving the evolution of customer-facing platforms, such as RyderShare™ and RyderGyde™, by embedding agentic AI.

We're also leveraging AI in FMS customer service and roadside assistance to enhance the customer experience while improving effectiveness. Additionally, we continue to drive operating efficiencies in our warehouses by deploying automation and robotics. We remain focused on profitably growing our contractual relationships by increasing customer engagement across our portfolio of port-to-door solutions. Over 90% of our revenue is generated by long-term contracts, and this high-quality contractual base has proven to be a key driver of business model resilience over the cycle. Our three complementary business segments are leaders in North American logistics and transportation and position us well to support customers and their increasing need for the value-added solutions that we provide.

I am confident our market-leading solutions, strong relationships, and transformed model will continue to drive long-term earnings growth. We're also excited to unlock the company's full earnings potential as we continue executing on our strategic priorities against the backdrop of improving freight environment. Turning to page five, our business model is benefiting from a broader and more diversified revenue mix. Key financial and operating metrics have improved since 2018, reflecting the effectiveness of our strategy. In 2018, prior to the implementation of our balanced growth strategy, the majority of our $8.4 billion of revenue was from our Fleet Management segment. Ryder generated comparable EPS of $5.95 and return on equity of 13%. Operating cash flow was $1.7 billion.

This was during peak freight cycle conditions. Now let's look at Ryder today. Our revenue mix has shifted towards Supply Chain and Dedicated, with approximately 60% of 2026 expected revenue generated by these asset-light businesses, compared to 44% in 2018, as a result of organic growth, strategic acquisitions, and innovative technology. Since 2018, we've more than doubled the size of our asset-light businesses while also delivering increased profitability. Our 2026 comparable EPS forecast range of $14.85 to $15.05 is more than two and a half times our 2018 comparable EPS of $5.95. Our return on equity forecast of 18%-19% is also well above the 13% generated during the 2018 cycle peak.

As a result of our profitable growth across our contractual businesses, forecasted operating cash flow of $2.6 billion is nearly $1 billion or 50% higher than 2018. In 2026, the business is expected to outperform prior cycles, even when comparing the pre-transformation peak to the current market environment. Moving to key performance highlights from the third quarter. Comparable EPS for the quarter was up 21%, marking our eighth consecutive quarter of comparable EPS growth. Results reflect the strength of our contractual portfolio, benefits from strategic initiatives, as well as improving performance in used vehicle sales and rental. Return on equity increased to 18%, in line with our expectations, given where we are in the freight cycle.

We remain on track to deliver more than $70 million in benefits from strategic initiatives during 2026. These initiatives are part of a multi-year program launched in 2024, with total benefits in excess of $170 million expected by the end of this year. Consistent execution on these initiatives is the key driver of expected earnings growth in 2026. Finally, we are encouraged to see benefits across the business from continued strengthening of freight market conditions. Contractual sales remain strong across all three segments, with activity accelerating in leased and dedicated. Increased sales activity and robust pipelines reflect the value of our solutions and increase customer demand for quality capacity.

Customers are facing a host of challenges, including increasing difficulty attracting and retaining drivers, securing reliable and safe capacity, and addressing rising insurance, transportation, and litigation costs. These dynamics reinforce the value of Ryder's end-to-end transportation and logistics solutions and are leading to new customer wins and expansion activity with existing customers. Used vehicle sales results continued improving and reflect better-than-expected pricing and retail sales volumes. Demand for used vehicles benefited from lower market inventories and spot rates that remain elevated. Lease miles per unit increased year-over-year and sequentially, indicating that our lease customers are increasing utilization of their fleets. Commercial rental utilization was strong at 77%, up 700 basis points year-over-year.

While demand remained below prior year, it increased sequentially in line with historical seasonal patterns and was particularly strong in the tractor class. Third quarter utilization was the highest we have seen since 2022, and we expect utilization will remain near this level in the fourth quarter. The market remains in the early stages of a recovery, with conditions continuing to improve. However, geopolitical and macroeconomic factors remain key variables affecting the pace and durability of the recovery. I will now turn the call over to Cristy to further review our third quarter performance.

Cristy Gallo-Aquino: Thanks, John. Total company operating revenue increased 6% to $2.8 billion, reflecting contractual revenue growth in Supply Chain Solutions and Fleet Management Solutions. Comparable earnings per share from continuing operations were $4.33 in the third quarter, up 21% from the prior year, reflecting benefits from higher earnings in Fleet Management Solutions and share repurchases. Return on equity, our primary financial metric, was 18%, up from prior year, reflecting share repurchases and earnings growth. Free cash flow increased to $992 million from $496 million in the prior year, reflecting lower capital expenditures year to date. In Fleet Management Solutions, operating revenue increased 5%, reflecting contractual revenue growth.

Earnings before taxes were $177 million, up 21% versus prior year, reflecting benefits from strategic initiatives on ChoiceLease results, as well as strengthening market conditions in used vehicle sales and improved rental performance. In rental, utilization increased to 77% on a 12% smaller average fleet. Rental results benefited from planned asset management actions and higher pricing. Rental pricing was up 4% year-over-year. Fleet Management Solutions EBT as a percent of operating revenue was 13.2% in the third quarter, up from prior year and in line with our long-term target of low teens over the cycle. We are encouraged to achieve this profitability level in the early stages of the freight market recovery.

Looking ahead, FMS profitability has further upside as used vehicle sales and rental market conditions normalize, and we begin to realize the benefits from contractual fleet growth. In used vehicle sales, year-over-year pricing increased 19% for tractors and 5% for trucks. Sequential pricing increased 15% for tractors and 6% for trucks. In the third quarter, the retail channel accounted for 61% of our sales volume, up from 54% in the prior year, and up from 56% in the second quarter. During the quarter, we sold 5,100 used vehicles, in line with prior quarter, and up 200 units year-over-year. Used vehicle inventory declined to 7,300 vehicles, near the lower end of our target range.

We are encouraged by continued improvement in used vehicle pricing, reflecting the early stages of a freight market recovery. In Supply Chain Solutions, operating revenue increased 9%, driven by new business and higher volumes and pricing, partially offset by lost business in automotive. Earnings before taxes increased 7% from prior year. Results benefited from higher volumes in e-commerce fulfillment and Ryder Last Mile, which leveraged our optimized omni-channel retail network. These benefits were partially offset by productivity of new business ramping up and lower automotive results. Supply Chain Solutions EBT as a percent of operating revenue was 8.1% in the quarter, at the segment's long-term target of high single digits.

In Dedicated Transportation Solutions, operating revenue decreased 1% due to lower year-over-year fleet count, partially offset by higher pricing. Sequentially, the power fleet count increased and was up 100 units due to improved net sales activity. Earnings before taxes declined from the prior year, reflecting lower operating revenue and a prior year workers' compensation insurance benefit, partially offset by benefits from strategic initiatives. Dedicated Transportation Solutions EBT as a percent of operating revenue was 7.5% in the quarter, at the segment's long-term high single-digit target. Next, let me cover capital expenditures. Year to date, lease capital spending of $996 million was below prior year, reflecting the timing of sales activity.

Year to date rental capital spending of $265 million was just below prior year. Our full year 2026 capital expenditures forecast of $2.4 billion is above prior year and unchanged from our prior forecast, as increased investments in our rental fleet will be offset by lower lease spending. Our 2026 forecast for lease capital expenditures is now $1.7 billion, above prior year, but below our previous forecast, reflecting the timing of lease sales activity. Our 2026 forecast for rental capital expenditures increased to $500 million, up $300 million from our prior forecast. A portion of these vehicles were delivered during the third quarter, and we expect remaining deliveries towards the end of the year.

This rental investment positions us to benefit from improving market conditions and capture higher expected demand in 2027. We expect the ending rental fleet to increase 8% sequentially in the fourth quarter, resulting in an approximate 10% increase in the second half of 2026. Even with these investments, our ending rental fleet remains below peak levels. We expect approximately $500 million in proceeds from the sale of used vehicles in 2026, in line with prior year. Full year 2026 net CapEx are expected to be approximately $1.9 billion. Our high-quality contractual revenue base is generating higher earnings and cash flow, which is de-levering our balance sheet at a more rapid pace than prior to our business model transformation.

This momentum is creating incremental debt capacity given our target leverage range of between 2.5 and 3 times. As shown on the slide, over a three-year period, we expect to generate approximately $10.5 billion from operating cash flow and used vehicle sales proceeds. This creates approximately $3.5 billion of incremental debt capacity. Together, these sources provide around $14 billion of capital available for deployment. Over the same three-year period, we estimate approximately $9.5 billion will be deployed for the replacement of lease and rental vehicles and for dividends. This leaves around $4.5 billion, which equates to approximately 50% of our quarter end market cap, available for flexible deployment to support growth and return capital to shareholders.

We estimate about half of our flexible deployment capacity will be used for growth CapEx, and the remainder will be available for discretionary share repurchases, strategic acquisitions, and investments. Our capital allocation priorities remain focused on profitable growth, strategic investments, and returning capital to our shareholders. Our top priority is to invest in organic growth. Aligned with these priorities, year to date, we funded lease and rental replacement CapEx of approximately $1.3 billion and returned $485 million to shareholders through buybacks and dividends. Our balance sheet remains strong, with leverage of 242% at quarter end, slightly below our target range, and continues to provide ample capacity to fund our capital allocation priorities.

With that, I will turn the call over to John to discuss our outlook.

John Diez: Thank you, Cristy, and turning to our outlook. We have increased our full year 2026 comparable EPS forecast to a range of $14.85-$15.05, up from a range of $14.40-$14.80. The increase to our forecast reflects stronger than expected third quarter performance and incremental benefits expected in the fourth quarter from improving market conditions in used vehicle sales and rental. We have increased our 2026 ROE forecast to a range of 18%-19% to reflect higher expected earnings. Our free cash flow forecast of $700 million-$800 million remains unchanged, and our fourth quarter comparable EPS forecast range is $4.25-$4.45, above prior year of $3.59. Our transformed model is well-positioned for continued earnings growth.

We continue to expect 2026 earnings growth to be driven by incremental benefits from multi-year strategic initiatives. These initiatives represent structural changes we're making to the business and are not dependent on a cycle upturn. In 2024 and 2025, we realized approximately $100 million in benefits, leaving more than $70 million of incremental benefits expected in 2026. In addition to driving outperformance relative to prior cycles, our transformed model also provides a solid foundation for the business to meaningfully benefit from the cycle upturn.

By the next cycle peak, we estimate the potential benefit could be $250 million or more, with the majority expected to come from the cyclical recovery of rental and used vehicle sales and Fleet Management Solutions, with additional benefits from higher omni-channel retail volumes leveraging our rationalized footprint. We expect to recognize these benefits over time as freight market conditions improve. We now expect to realize approximately $40 million of upturn benefits in 2026, up from the $20 million in our prior forecast. These benefits are driven primarily by higher used vehicle sales results and to a lesser extent, from improved rental performance. Profitable contractual growth provides another meaningful opportunity for long-term earnings growth.

Strong 2026 sales activity in leased, Dedicated Transportation Solutions, and Supply Chain Solutions is creating growth momentum across our contractual businesses. We remain focused on pricing discipline, and as a result, we expect our portfolio of five to seven-year lease contracts in FMS and three to five-year contracts in Supply Chain Solutions and Dedicated Transportation Solutions to provide strong returns and earnings durability. We've been pleased by the business's resilience and performance over the most recent cycle and are confident each of our business segments is well-positioned to benefit from the cycle upturn. Our transformed business model continues to deliver value to our customers and shareholders.

We continue to outperform prior cycles, and our results are benefiting from consistent execution and the strength of our contractual portfolio. We continue to see significant opportunity for profitable growth, supported by secular trends, our operational expertise, and ongoing momentum from multi-year strategic initiatives. We remain committed to investing in the future with products, capabilities, and technologies that will deliver value to our customers and our shareholders. Our transformed model provides a solid foundation for Ryder to meaningfully benefit from the cycle upturn. That concludes our prepared remarks. Please note we expect to file our 10-Q later today. At this time, I'll turn it over to the operator to open the call for questions.

Operator: Thank you. If you would like to ask a question, please signal by pressing star, one on your telephone keypad. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Your first question is from Jordan Alliger with Goldman Sachs.

Jordan Alliger: Yeah. Hi, morning. Thanks. A question, there's been a discussion of late from other transports about driver-related cost pressures, difficulty in getting drivers, particularly in Dedicated. I'm just curious if you could talk to those two points, and the inflationary pressures on the driver front, does that in any way impact your ability to do what you want to do on the Dedicated margin front? Frankly, can you go in and do you need to go in to rework contracts as needed? Thanks.

John Diez: Hey, good morning, Jordan, and thank you. Yeah, let me address some of the market conditions, and then I'll turn it over to Steve, who can provide you details. Just a reminder for the group, our Dedicated business is highly specialized, so much of the discussion you've heard in the marketplace, clearly for us is a little bit different in that 70%-80% of our Dedicated is highly specialized. These are typically private fleet conversions, where we take over a private fleet and execute the transportation. Typically, we are dealing with very experienced professional drivers, which have a different wage structure than as you would consider a brand-new driver.

What we've done over the last couple of years, and you heard us talk about this post-COVID, is we've introduced to many of our contracts inflationary adjusters for wage inflation, and that's still in place. So we would expect the impact to us to be really limited to select markets and not a broad-based kind of impact. I'll let Steve maybe talk a little bit about what that looks like.

Steve Sensing: Yeah, thanks, Jordan. Overall, we're seeing about a mid-single-digit wage increase in certain regions, so it's very targeted, not a wide range nationwide issue. If you'll recall back during COVID, we already worked on our contracts with our customers to really address this, so we have annual CPI openers for the customers, but we also have driver wage indices that allow us, if we see a drastic change, to go back and open discussions with those customers. I think we're pretty well protected there. Sometimes it's not immediate, but we do have tight windows. From a recruiting standpoint, our recruiting team does a great job.

Remember, 80% of our jobs are home every day or every night, so that's very attractive along with our comprehensive safety program. So I think we're in pretty good shape there, and we'll continue to focus on that.

Jordan Alliger: Great, thanks. Just one other quick follow-up question on the FMS side. It was a good step up in that margin to the 13% level. I guess the question is: Can we stick around that level, or what has to happen to stay at that target zone?

John Diez: Okay. I will let Tom address that.

Tom Havens: Yeah, I appreciate you pointing that out, but it was the first quarter where we saw all three key product lines, lease, SelectCare and rental, all with year-over-year revenue increases, albeit relatively small in rental. But it was nice to see. It was the first time we had seen that increase year-over-year since Q4 of 2022. We are expecting this to be the inflection point with rental.

So very encouraging to get to 13% this early in the cycle, but certainly encouraged that we will continue to do that with all three product lines growing year-over-year, so we do expect to see that over the coming quarters and into next year, assuming we continue to see the tailwinds of the cycle.

John Diez: Yeah, Jordan, just to add to that, I think we want to underscore the fact that all the good work the team has been building up for with all the strategic initiatives, both on the maintenance side and the lease pricing side, has gotten us here. That business to get to that low teens level early in the cycle really underscores the good work that the team has been doing. So thank you for asking the question.

Jordan Alliger: Thank you.

Operator: If you find that your question has been answered, you may remove yourself from the queue by pressing star one again. Your next question is from Brian Ossenbeck with JPMorgan.

Brian Ossenbeck: Hey, good morning. Thanks for taking the question. Maybe just a quick follow-up first, just on the, I guess the dedicated protection. Have you felt any, I guess, mismatch in terms of timing when you can push through the higher cost and pay for the drivers yet? With Cardinal, I think you closed that in 2024. Was there anything you need to do there to kind of bring those contracts up to the same level of protection?

John Diez: Yeah, Brian, I think you're asking primarily about the timing of the wage increases relative to when we can recover from our customers. I would say there's usually a bit of a lag. We're not seeing any significant drag in our business as of yet. I think as you heard from Steve, there are select markets where that becomes more acute, and we're getting out in front of it pretty quickly. We did make the acquisition of Cardinal back in early 2024. This will be the first cycle that we go through that with those customers. Many of those customers have been replaced over the last several years, and we've introduced that kind of language and protection in those contracts.

Obviously, there may be a little bit of a tail, but we don't expect any material drag from that activity.

Brian Ossenbeck: All right. Thank you for that. Then just secondly, you raised the, I guess, the benefits for the upturn conditions in FMS, another $20 million to $40 million. How is that split between Q3 and Q4, and what are sort of your early thoughts on how the remaining might transition into next year?

John Diez: Yeah. As you saw in the numbers, we continue to see really good used vehicle performance. We are seeing at a broad market level lower used vehicle market inventory. So that's providing a little bit of tailwind for us. We did start moving our retail wholesale mix upward and getting back to normalized levels, so we made improvements there, so a good portion of that improvement of the $20 million going to $40 million, I would say, is used vehicles, both driven by pricing and some of the actions we're taking to improve the overall retail mix. Then you are seeing early signs of an inflection point, as you heard from Tom Havens, on rental.

We do expect this fourth quarter to be better than last year's fourth quarter. So you got a little bit of the carry-through from rental posted in that incremental $20 million for the year.

Brian Ossenbeck: Okay. Thank you, John.

Operator: Your next question is from Scott Group with Wolfe Research. Scott Group Analyst Hey, thanks. Good morning. I want to just ask about some fleet expectations. I guess leasing Dedicated continued to fall a little bit sequentially. Rental, I guess, just started to move up for the first time in a couple of years. How should we think about fleet growth for the three businesses into 2027?

John Diez: Yeah. I will give you some high-level remarks, and I think Tom can provide some details for you. If you think about what has been happening over the last several quarters, we have been seeing great sales performance. So we do have this ability to win, and when that equipment will start coming in from both Dedicated and Fleet Management. Our expectations, we kind of flattened out in the quarter. You may see a pickup in Q4, and then it becomes more meaningful for both of those businesses as you get into 2027, to start the year.

But I will let Tom maybe talk a little bit about what he is seen at lease and also what is happening with the rental fleet.

Tom Havens: Yeah. So it is probably a little bit different story depending on the product line. I will start with lease. As John mentioned here, we have had three consecutive positive net sales quarters in lease, but really accelerated here in the third quarter. Now with lease, some of the timing, it does take a little bit longer before you see those sales results transition into the fleet, with some of the ins and outs and the timing of the order. So may not necessarily see the lease fleet improve yet, by the end of this year. But certainly going into 2027 based on the sales results we are seeing, we would certainly expect to see that.

In rental, I think we have seen the inflection point, and you heard from some of the opening comments that we have placed orders and you are going to see that rental fleet continue to grow, through this year, with some benefit here in the fourth quarter, but really to set us up for what we expect to be an increasing demand environment into 2027. And then SelectCare, we started to see it in Q2, where we did start to sign new business. And in SelectCare, you see it much more quickly than you do with lease as you transition those maintenance contracts pretty quickly. So you saw fleet growth, pretty good fleet growth year-over-year.

Our pipelines are really strong, really at record levels in both SelectCare and in Lease. We would expect that momentum to continue to carry into 2027 and see, in 2027, all three product lines with fleet increases. Scott Group Analyst Okay. Then just secondly, we've got 40 of the 250 of cyclical upturn tailwinds. Versus history, does that feel about right to get that sort of percentage in the first year of an up cycle? What does the second year typically look like? I do not know.

Some of this is transactional, so hard to know, but how much of an uptick do you think we could see, Ralph, of that 250 target, and any other thoughts on the puts and takes for 2027?

John Diez: Yeah, I would say, look, this is indicative of early cycle. When you get to the mid-portion of the cycle and things are going, we still need some freight demand to accelerate, and if you get that acceleration, especially around rental, you are going to see that number spike up. This is kind of typically the numbers you would expect early in the cycle, and then as rental accelerates, you are going to see that number increase significantly, and then it tapers off as you are approaching the peak of the cycle a little bit, the incremental improvements. But that is typical of what you should expect. Scott Group Analyst Thank you.

Operator: Your next question comes from Ravi Shanker with Morgan Stanley.

Nancy: Hi, this is Nancy on for Ravi. Thanks for taking my question. It would be helpful to hear any thoughts into peak season strength across all three businesses.

John Diez: Sure. Look, as you've heard already on the call, we've seen good acceleration in demand for the services we offer, especially in the quarter. We saw Dedicated Transportation Solutions continue to build on the momentum we saw in Q2, as well as lease, where we saw good activity. We hadn't seen that level of sales activity going back to post-COVID, so that was a good indication for the business. We have seen continued solid performance on the Supply Chain Solutions side, on the sales side. We did see our transactional businesses continue to improve. You saw used vehicle pricing get better.

You also saw our rental utilization get back to normal levels, mid-70s, and at the end of the quarter, we were in the high 70s. We expect that to continue and spill over into Q4 as we even add more fleet. We're seeing increased demand on our contractual businesses, increased demand from some of our transactional businesses. As you heard, we also saw better utilization of the lease fleets. Our lease customers are running more miles on their fleet, which should translate later on to more fleet additions as we move through the cycle.

Speaker 9: Great. Thank you. That's helpful. One more question on the dedicated side. I know revenue remains a bit under pressure from the lower fleet count. Are you seeing signs that customers are becoming more willing to commit to dedicated capacity, or what needs to change for fleet growth to start turning positive?

John Diez: Yeah. What we are seeing is actually more activity from dedicated capacity as the spot rate market has moved up and good quality capacity has been taken out of the market. They're coming to us looking for a high level of service at a reasonable price level, so we have seen a little bit of move back from that dedicated capacity space into our dedicated business. More importantly, what we continue to see is customers looking for specialized dedicated. We're seeing fleet conversions continue to accelerate in this market environment because the driver environment is getting tighter. We're seeing increased cost in insurance claims and the rising cost of equipment. All those things are putting pressure.

We could do it more efficiently and more effective for our customers. I'll have Steve maybe add a little bit of color on what he's seeing in the dedicated space.

Steve Sensing: Yeah. I'm going to add, the pipeline remains healthy. We're seeing some good opportunities there. As John said, some of these customers traded cost for service earlier in the year and last year. We're seeing that come back to us now as the tender acceptance rate for truckload is on the rise, so they want a service that they can count on, but again, our lost business is down year-over-year versus last year so it should put us in good shape for 2027.

Speaker 9: Great. Thank you.

Operator: Your next question is from Brandon Oglenski with Barclays.

Brandon Oglenski: Hi. Good morning. Thanks for taking my question. John, can we unpack the capital priorities, just given the returns that this business is putting off now, especially maybe in regards to M&A? Because we've seen some dislocation and some other competitive deals go through here recently, so how do you see that landscape unfolding from your perspective?

John Diez: Yeah. Well, we're in a different part of the cycle and coming into this upturn, one of the things that we do have plenty of that capacity on the balance sheet. If you look at our targeted leverage, we're on the low end of our targeted leverage of 2.50. So we have plenty of capacity. Our first priority would be to continue to grow the fleet, rebuild the rental fleet, which is down almost 30% from peak levels. So we're going to continue to deploy capital there. We're excited to deploy capital in high return business, fleet growth that we know we could execute against. And then we'll look to opportunistic acquisitions.

Obviously for us, priorities include adding capabilities, whether it's on the supply chain side or value accretive acquisitions that we could do and take advantage of opportunities that are in the marketplace. We'll continue to look at those. That would be our top priorities, clearly to build a stronger foundation for the future. And then as we continue, even in this higher capital spending cycle, we would continue to look to deploy capital and return capital to our shareholders.

Brandon Oglenski: Appreciate that response. Quickly on supply chain, I think you guys talked about potentially maybe a contract loss there, but also new contracts starting up. How do you think about getting back on track to long-term growth targets and margin targets in that business? Thank you.

John Diez: Well, yeah. We've made mention about the lost automotive account. We finally, as you saw in the results, our year-over-year revenue growth was strong at high single digits of 9%, so that is, we've lapped that account. We continue to see good demand in the marketplace, and we expect that business to continue to grow. When you look at the bottom line performance, this business continues to deliver at high single digit targets. We had another good quarter, above 8%, and we expect that business to continue to deliver high single digit targets through the year. Steve, anything else to add there?

Steve Sensing: Yeah. I would just add a couple of things. John spoke about that lapsed automotive loss last year. In that situation, they went away from dedicated and supply chain to truckload. We've seen through our pipeline part of that opportunity coming back to us. I think I said that earlier in the year. We're really excited about that. I think too, if you look at our pipeline, we're seeing really solid increases in CPG, industrial healthcare, and retail. I think as John said as well, for us to get to low double digits, that will take M&A activity. But we had a really solid quarter.

Brandon Oglenski: Thank you.

Operator: Your next question comes from Rob Salmon with Wells Fargo.

Rob Salmon: Hey, good morning. Thank you for taking our question. We saw a real nice acceleration in the revenue per active in ChoiceLease. Can you give us a sense of what the roughly 200 basis point acceleration came from? Was this just contractual renewals with your annual rate increase, new business or something else?

John Diez: Well, thank you, Rob. It's a function of two factors. One, obviously, as we renew the new equipment, you've got higher inflation on that equipment, and then we are making sure that our pricing discipline and hitting our target spreads is showing through. So you're getting the benefit of that. We've also had a record level redeployment, so we've put a lot more equipment to work, which has improved the overall performance of the portfolio and the business.

Rob Salmon: That's helpful. Then with the response to an earlier question, I think it was Scott's, about the fleet. It sounded like there'd be continued pressure, in the near term. I'm curious if we can see sequential growth, looking out to the fourth quarter within the ChoiceLease product, given some of that new contract momentum you had talked about earlier on the call.

John Diez: Yeah. I wouldn't say pressure meaning downward pressure. Right now, we've kind of flattened out. You should see that flattening to uptick, perhaps in Q4, and then continued as the new equipment starts arriving. We should expect Q1 and beyond that in 2027 to continue to grow and accelerate.

Rob Salmon: John, just as my final follow-up there, in terms of the growth, any sense of what that can be? Should we be thinking about low single-digit growth? Can it be better given the backdrop?

John Diez: Yeah. Right now, the business you've seen, and overall the business is growing at mid-single digits. That's the complement of all three product lines that Tom talked about. As we get into the upcycle, you're going to see an acceleration of the top line from rental. That's probably going to be the catalyst. You are going to see healthy growth from Lease. I would expect that to be in the mid to high single digits as we start growing that fleet. Then you're going to see SelectCare continue to deliver mid-single digit growth, based on the market conditions we have in front of us.

Rob Salmon: Really appreciate the context.

Operator: Your next question comes from Bascome Majors with Stephens Inc.

Bascome Majors: Thanks for taking my questions. John, just under two months ago, I believe you guys commissioned an investor perception study of analysts and shareholders. I know that's probably not complete yet, but if you could share any early findings that you had from that engagement. What surprised you, what hasn't, and how is the board and management thinking about incorporating that into the company strategy going forward? Thank you.

John Diez: Yeah, Bascome. I have not seen the results of that, or reviewed that, so it'll be premature for me to comment on that. I will tell you, look, I think generally speaking, when we talk to shareholders, I think everyone's been very pleased with, number one, the execution of the strategy that we set out to go after. The business mix has really dramatically changed, has elevated as we've talked about the overall profitability and the resiliency of the model. I think one of the things that we're really proud of is we've been able to take those asset-light businesses.

We've more than doubled those businesses and have expanded margins, while at the same time significantly improved the margins of our historically largest segment, which is Fleet Management Solutions, and we expect that to continue. One of the things we're excited about for the future is really around how do we leverage our port-to-door solutions and continue to grow. We're seeing early success with how do we grow our relationships, which are deeply rooted, and they're long-lasting relationships with many of our customers, where we can help them and solve some of their biggest supply chain challenges.

So I think that will show through going forward in our strategy and what you hear from us, but as far as early indications from that report out, I don't have it, but clearly, I think we're going to hear good things about the execution from the team on the overall strategy.

Bascome Majors: Thank you.

John Diez: Yeah.

Operator: Your next question is from Jeff Kauffman with Citizens Bank.

Jeff Kauffman: Thank you very much, and congratulations. I want to get back to the growth question again. I know this has been answered a couple different ways. You had talked about an increase in demand, an increase in mileage, both contractual and transactional. I was wondering if I could get a little bit more of a feel for it, just in terms of, is it an equipment size that you're seeing stronger than the other? Is it an industry segment or two that's a little stronger than others? Is it geographic? Because based on your comments, it's across the board and kind of ubiquitous.

John Diez: Yeah. I will tell you, obviously, there's going to be unique circumstances out there, but I'll paint a broad brush picture of what we're seeing in the landscape. We are seeing customers add fleet, which we hadn't seen in some time, Jeff. When they're adding fleet, we're seeing additions across all three asset classes. We have seen on the Dedicated side, on specialized handling, we have seen higher demand for construction and on the industrial side, which is interesting. When you look at asset classes and asset class performance, I will tell you on rental specifically, we did see an acceleration in the tractor class in the quarter.

We're going to grow that tractor fleet by 10% as we move into next year, by the end of the year, so that hopefully gives you a little bit of a broad perspective. I would say lease and dedicated is pretty broad-based. We are seeing good activity on the industrial side, on the dedicated sales activity, and rental, we did see an acceleration in both tractors and trailers, which is indicative of maybe this freight market showing signs of life, which is one of the encouraging signs we saw in the quarter.

Jeff Kauffman: No, that's very helpful. With respect to that rental fleet, you had gone about kind of downsizing the ratio of tractors relative to trucks.

John Diez: We did.

Jeff Kauffman: Over the last year or two. Right now, the rental fleet, at least on my numbers, if I combine the rental and the lease fleet, the rental fleet represents about 21% of that total, and normally that ratio is closer to 25%. And tractors are going to be kind of tough to get over the next six to nine months just because of the EPA mandate.

Do you have order slots already, or is that why you're saying, we'll get that tractor fleet up 10% by the end of next year, and then over what time do we go back to 25% of the total fleet, since a lot of rental is holding for lease customers where the equipment isn't ready?

John Diez: Yeah. We do feel confident we could grow that fleet. Everything you asked will be dictated by market conditions, right? If we continue to see demand, we're going to meet the demand, and we have not only the slots, but we obviously have a large fleet that we could redeploy equipment and do some things with our assets to meet some of that demand. What I will tell you is we've already taken action. I'll let Tom speak to it a little bit more in detail.

We've taken action already in the quarter of starting to bring in equipment, and we made some orders, as you saw in our increase in our rental CapEx for the balance of the year, which we think are going to alleviate some of the pinch points we're seeing in the marketplace. Utilization is not yet to screaming red levels like we saw post-COVID, but it'll get there if we don't add fleet, and we're going to continue adding fleet to meet that demand. Tom, maybe you could add a little bit of color on the fleet itself.

Tom Havens: Yeah. Just to clarify a point, the 10% increase will be from Q3 to Q4, so we've made a pretty significant tractor order already. Your comment about availability of slots, that's not an issue. We were certainly able to order what we needed and have a pretty significant tractor fleet increase here in rental just in the fourth quarter. Going into 2027, obviously, we still have work to do on how much we'll continue to add to that fleet. The market will help dictate that. But to your point about the percent of the fleet, you might expect that to tick up a little bit, a couple of percentage points, depending on what the market tells us.

Looking at history, during the peak times, you typically do see that percentage increase a little bit on tractors, and I would expect to see the same thing, assuming the market indicators are there.

Jeff Kauffman: Okay, great context. Thank you.

Operator: The next question comes from Ben Mohr with Citi Bank.

Ben Mohr: Hi, good morning. Thanks for taking the question. John, Cristy, and team, thanks for fitting me in at the tail end here. My first question is on your used vehicle sales net target. Last quarter, you had it at $40 million for the year, and it sounds like from the previous conversation here, maybe we're targeting $55 million-$60 million given your $20 million increase in your 2026 benefits. My question on that is kind of risk and puts and takes to that, given this quarter, the strength was driven by, as you mentioned, both volume and retail mix, 61% versus wholesale. The question is kind of how should we think about that trending in the rest of the year?

What's the risk on that? Could it be driven by the truck capacity dynamic turning a different direction or EPA 2027? Just wanted to get a sense of kind of risk to that and inputs it takes.

John Diez: Yep. Yeah, Ben, you have it right. Coming into the quarter, we had signaled to about a $40 million used vehicle performance for the full year. That was up about $20 million year-on-year. We are now signaling up more closer to, I would say, to $50 million than to $60 million, as you called out. What we do see in the marketplace, which I think are favorable trends, even despite some of the potential headwinds we could face, is we continue to see market inventories decline. Our inventory continues to decline. We are now at the low end of our target range of 7,000. We are going to continue to sell through that inventory.

I would suspect that it is going to give us the opportunity to continue to move our retail mix upward. Right now, we would expect to hopefully continue at the same level you saw in Q3, but as you get into next year, we are going to get into the 70s. And get into a 70% level with our retail wholesale mix based on the inventory levels we have. So we have that lever for us based on the thin inventories we expect to face later next year, so that is probably the biggest, I would say, hedge against market forces.

We continue to see capacity being taken out of the market, and as long as the spot rates remain elevated, I think there is going to be demand for equipment, and we have equipment ready to provide that service. That is kind of how we are seeing it right now. And obviously, come February, when we get back together, we will give you a look at the full year for 2027.

Ben Mohr: Great. Thanks for that color. That is very helpful for how we should think about modeling the next quarter and into next year. My follow-up question is on what you are seeing as sort of in the road ahead strength in your DTS with your sort of three to five year contracts. Other truckload dedicated carriers have been seeing a ramp in their renewal rates for their contracts. At the beginning of the year, kind of starting point at up low single digits to now many of them are seeing high single digit, low double digit.

Can you say that you are seeing kind of a similar upward trend or better or worse, and so this will signify kind of more benefit to come in 2027 and 2028?

John Diez: Yeah, we are different, so we are not in that truckload carrier or dedicated capacity space like some of the competitors you alluded to. Most of our business is specialized, dedicated, which is highly engineered solutions, with specialized handling from our drivers in providing that service. I would say they behave a little bit different from a pricing perspective, because you are not trading price for service per se. We have committed to a level of service that they expect.

What you should expect is continued discipline from us on pricing, and as wages and inflation continues to tick up, we do have the measures and structurally in our contract that gives us the benefit to be able to recoup those. We will continue to sign good business because there is good activity in the marketplace. As capacity tightens, we should be able to take advantage of those opportunities as the market develops here. Hopefully that gives you a little bit of color on how we see dedicated progressing.

Ben Mohr: Wonderful. Really appreciate that. Thank you.

Operator: Our next question is a follow-up from Scott Group with Wolfe Research. Scott Group Analyst Hey, thanks for the follow. Appreciate it. Just a couple of things. How are we thinking about impact of higher rates and, I don't know, buy versus lease decisions, return targets, all that sort of stuff?

John Diez: When you talk about return targets, Scott, you are talking about returns on the overall business? Scott Group Analyst Yeah, just does higher rates impact your ability to hit return targets and things like that? Interest rates. Yeah. Look, for us, we continue to see that we are on pace of hitting our return targets, right? Just to reiterate, because I think it is important. We are in the early parts of the cycle. Our return on equity is in that 18%-19% level.

Based on what we are seeing in the marketplace and some of the inflection points we discussed around that Fleet Management Solutions business, we are going to move closer to our long-term target of low twenties over the cycle, so we expect a progression there as some of that 250 gets realized. We are staying disciplined around our pricing, both on the lease side. You saw rental pricing improve sequentially in the quarter. We would expect pricing and rental to continue to strengthen, which can provide potentially upside opportunities on some of those returns over the cycle. As you just heard from myself on Dedicated Transportation Solutions, we continue to see good activity there. Obviously, capacity is tight.

There is opportunity for us to get some good rates while capacity remains tight. I would expect both Supply Chain and Dedicated to continue to perform at their high single-digit targets. Scott Group Analyst Okay. How fun. Then just last thing, if I can. What's the impact of this still EPA uncertainty? Are your customers hesitant to be placing orders for 2027 now? Does this impact you? Just any thoughts on the EPA? Sure. What we are seeing, I will tell you, I think we've called it out.

We didn't see kind of this pre-buy surge activity with the change in the technology, but I do think Tom Havens has some color around what we are seeing is price increases in the marketplace, which customers are feeling the impact of that, and we're helping them navigate through the increased pricing in the marketplace going into next year.

Tom Havens: Yeah, I think it's pretty well understood at this point that price increases are coming in 2027. Despite that, there was not any significant pre-buy activity. Some customers took advantage of it, but certainly not to any large extent. The non-performance penalties, non-conformance penalties or NCPs are clear to the marketplace at this point. So we kind of know what pricing will look like and what type of increases they're looking at. The only thing that's maybe unclear is what happens after the non-conformance penalties and the engine manufacturers put out their new technology engines. That's certainly not clear to the market. We probably won't know that till some point mid-next year.

We do have those conversations with our customers on a consistent basis, and the message is generally, act now because pricing is increasing, and I think that's well understood in the marketplace. Scott Group Analyst Thank you, guys. Appreciate it. Yep.

Operator: Our next question is a follow-up from Brian Ossenbeck with JPMorgan.

Brian Ossenbeck: Yeah, hi. Thanks. Just a real quick one here. With the sequential pricing up, I think it was 15% tractors and mid-single digits for trucks. Is that on a like-for-like basis? I know you talk about shifting the channel around a little bit sometimes. There is some vintage movement there as well. I just wanted to see how clean of a read that is for the overall market. Thanks.

Tom Havens: Yeah. Hey, Brian. Thank you for the question. There is a little bit of noise there. I would say, on the tractor side, you are getting the benefit of a shift in retail mix there. As we have gotten lighter on inventory, we were able to take advantage of that and sell more through our retail channel, so you are seeing that 19% be a little bit inflated by our retail mix activity in the quarter. Generally speaking, I would say we continue to see pricing on a like-for-like basis continue to improve across all asset classes, so that is really the underpinning performance of the overall margin there.

Brian Ossenbeck: Okay. Any way to quantify roughly the wind assistance or the asterisk we should put on that, or is it too difficult to tell?

Tom Havens: No, I would say, look, I think absent the retail wholesale mix shift, it will probably be high to low double digits on the tractor side. It is about 700 basis points that it benefited from.

Brian Ossenbeck: Perfect.

Tom Havens: Yep.

Brian Ossenbeck: Thank you very much.

Tom Havens: Thank you.

Operator: There are no further questions at this time. I would like to turn the call back over to Mr. John Diez for any closing remarks.

John Diez: Yeah, thank you, everyone. Appreciate taking an interest in Ryder, and look forward to seeing you out on the road. Take care now.

Operator: This concludes today's conference call. You may now disconnect.

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