Ryder System made two announcements Wednesday morning, one expected and the other some news.
In addition to announcing record third-quarter earnings, Ryder (NYSE: R) said it was acquiring Midwest Warehouse & Distribution System.
According to the company’s prepared statement on the acquisition, Midwest has nine multiclient warehouses and eight dedicated-customer warehouses. It described its area of activity as five regions, primarily in Chicago “and to a lesser extent” New York, Pennsylvania, Tennessee and Texas.
A price for the transaction was not disclosed. However, Ryder did say in its statement that the acquisition is expected to add $135 million to the company’s Supply Chain Solutions segment in 2022. In the third quarter of 2021, the SCS division posted GAAP revenue of $802 million, up 17% from a year ago.
Ryder said it expects to close the deal next month.
Midwest specializes in food, beverage and consumer packaged goods. In its statement, Steve Sensing, president of global SCS, said Ryder had been targeting an acquisition in that area “for some time.” Sensing said Ryder serves nine of the top 10 food and beverage companies, “and this acquisition enables us to offer those customers — as well as additional blue-chip customers in Midwest’s portfolio — even more capacity and greater flexibility.”
Also in the statement, Darin Cooprider, the senior vice president of consumer packaged goods at Ryder, said the multiclient warehouses can be an entree for customers to then move into a dedicated warehouse operated by Ryder.
And Sensing, in his statement to FreightWaves, said with the acquisition of Midwest, “as our customers’ businesses grow, we can offer a seamless transition to a wide range of end-to-end supply chain solutions.”
The executive team at Midwest will be retained, the statement said, and its operations will be integrated into the consumer packaged goods operations at Ryder.
Ryder had signaled in its second-quarter earnings that its finances had strengthened enough that an acquisition was possible. “Our balance sheet remains strong and leverage is near the bottom end of our target range, providing opportunity for future strategic acquisitions and/or share repurchases,” it said in its second-quarter earnings announcement.
On the earnings front, Ryder’s third-quarter revenue of $2.45 billion beat consensus forecasts by $130 million, according to SeekingAlpha. Its non-GAAP earnings per share of $2.55 beat consensus forecasts by 46 cents.
Premarket, Ryder’s price per share was up more than 3%. In the past 52 weeks, it is up roughly 86.5%.
Ryder’s Fleet Management Solutions segment is the largest of the three segments that make up Ryder’s operations, responsible for the leasing of vehicles as well as the sale of those vehicles into the secondary market. Its non-GAAP revenue rose to $1.25 billion from $1.15 billion in the third quarter of last year, an 8% gain.
But it was its Supply Chain Solutions and Dedicated Transportation Solutions that showed the biggest percentage growth. Ryder describes the services of SCS as “distribution management, dedicated transportation, transportation management, last mile and professional services.” As for DTS, it is a dedicated transportation service provided to customers.
For the quarter, SCS saw its non-GAAP revenue rise 14%, to $559 million. At DTS, it was up 16%, to $272 million.
Ryder is a major source of truck and tractor sales into the secondary market, and its third-quarter numbers were far superior to last quarter’s. Used vehicle sales are reported by Ryder as a negative net cost, and that figure rose to $69.3 million for the three months, compared to $12.9 million last year. In the second quarter, the figure was $51.6 million.
Ryder’s earnings call with analysts is Wednesday at 11 a.m.