Ryder System (R) Tops Q2 EPS by 34c

Ryder System (NYSE: R) reported Q2 EPS of ($0.95), $0.34 better than the analyst estimate of ($1.29). Revenue for the quarter came in at $1.9 billion versus the consensus estimate of $1.97 billion.

COVID-19 Impacts to Date and Outlook

The COVID-19 pandemic and measures taken to prevent its spread negatively affected Ryder's business for a total estimated pre-tax earnings impact of $45 million in the second quarter, including lower commercial rental demand ($55 million estimated impact) and reduced automotive activity in supply chain ($25 million estimated impact), partially offset by COVID-19-related temporary cost savings of $35 million. In addition, the impact of COVID-19 on current and expected used vehicle market conditions triggered a review of Ryder's residual value estimates, resulting in increased depreciation and valuation adjustments totaling approximately $49 million in the second quarter.

Due to the effects of COVID-19, the company now expects the recovery in the used vehicle market will be delayed beyond the company's prior expectation of mid-2021. Although we saw stronger than expected volumes in used vehicle sales in both the retail and wholesale markets, we expect pricing pressure to continue through mid-2022. As a result, the company primarily extended accelerated depreciation on vehicles expected to be sold by an additional year through mid-2022 and lowered long term policy residual value estimates, particularly for trucks. Additionally, in order to address elevated used vehicle inventories, certain vehicles were written down to reflect wholesale pricing levels. The estimated impact of the residual value changes in the second quarter includes $31 million from additional accelerated depreciation and valuation adjustments and $18 million of policy depreciation.

For earnings history and earnings-related data on Ryder System (R) click here.

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