Ryder System Inc. (R) reported adjusted earnings per share (EPS) of 50 cents for the third-quarter 2009, exceeding the Zacks Consensus Estimate of 45 cents. However, adjusted EPS declined 60% year over year from $1.26, due to lower earnings from the Fleet Management Solutions (FMS) segment.

The supply chain, warehousing and transportation solutions provider reported adjusted net income from continued operations of $28.2 million, down from $71.2 million a year ago, due to sustained declines in the commercial rental business, full service lease and used vehicle sales in the FMS segment.

Consolidated revenues from continued operations, which declined 20% year over year to $1.26 billion, continue to be affected by lower fuel prices and unfavorable exchange rate swing. Operating revenue, which is revenue excluding FMS fuel and all subcontracted transportation, declined 13% year over year to $1.04 billion.

Following is a snapshot of segment-wise results:

Fleet Management Solutions (FMS):

Revenue from the FMS segment declined 22% from last year to $911.9 million as fuel service sales declined 49%, partly due to declining fuel prices. Contractual revenue (includes full service lease and contract maintenance) declined 3% due to adverse exchange rate movements and fleet reductions by customers as a result of prolonged freight recession. Lower pricing, reduced utilization and a weak economic environment affected commercial rental revenue, which declined 25% year over year. Reported pre-tax earnings from this segment declined 64% from last year to $37.4 million, impacted by lower global commercial rental and global full service lease results coupled with higher pension expense and declined used vehicle revenue.

Supply Chain Solutions (SCS):

Total revenue and operating revenue (revenue excluding subcontracted transportation) both fell 22% year over year to $298.7 million and $249.6 million, respectively. This decline is attributable to decreased automotive and other freight volumes, reduced fuel volume and prices as well as unfavorable currency exchange swing.

Pre-tax earnings fell 4% from last year to $15.1 million as a result of $1.1 million in operating loss associated with European markets. Ryder plans to exit this market by the end of 2009.

Dedicated Contract Carriage (DCC):

The DCC segment posted revenue of $120.6 million, reflecting a 14% decline from the year-ago quarter. Operating revenue (revenue excluding subcontracted transportation) also declined 15% to $116.9 million. These results were impacted by decreased fuel costs and freight volumes. Pre-tax earnings of this segment declined 26% to $9.8 million as result of lower revenue and higher safety and insurance costs.

Ryder provides a comprehensive suit of transportation and supply chain solutions, leveraging its sate-of-the-art technologies, skilled logistics professionals, and proven processes. The company’s technologies and solutions improve overall transportation efficiencies in a cost-effective manner while adding value to customers. Ryder was recently selected by the Inbound Logistics magazine (a leading trade magazine) as the top logistics provider in the US.

Ryder continues to win business contracts from major international companies. The company recently sealed a major contract from Shell Oil Company to provide carriage and transportation management service in the Gulf of Mexico region, representing 80% of Shell’s oil and gas production in the US. Moreover, Procter & Gamble (PG) awarded Ryder a contract to manage a part of its logistics network in the US and Mexico.

Ryder is reducing capital spending as a measure to cope with the ongoing economic slump. The company has truncated its capital expenditure forecast for 2009 to $550 million from its previous expectation of $940 million. This represents a significant decline from $1.27 billion spent in 2008. Capital expenditure for the first nine months of 2009 was $468.3 million.

The prevailing macroeconomic headwinds coupled with sustained freight recession are expected to continue affecting the company’s operating performance of the FMS and SCS segments for the remainder of 2009. Moreover, lease sales and renewals continue to remain under pressure due to sustained fleet reductions by the customers. Commercial rental and used vehicle sales will be negatively affected by the economic volatility.

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