Ryder System CEO: Riding Higher? | Mad Money | CNBC

All right, what happened with Ryder here yesterday morning? They beat Wall Street earnings estimates, yet the stock got crushed down 5%. Ryder is a company that many people don't really understand because they still associate the brand with a consumer truck rental business. These guys sold off two decades ago. The Ryder of today is a leading provider of transportation and logistical solutions like truck leasing, fleet maintenance, outsourced supply chain management. They have over 30,000 trucks for both short-term and long-term commercial rentals. To give you a sense of Ryder's actual business, consider what they do for CVS. The drugstore chain Ryder provides CVS with hundreds of dedicated drivers, tractors, and trailers. They help meet the tight delivery schedules at CVS's stores and support its supply chain expansion. By outsourcing all this stuff to an expert like Ryder, CVS saves a bunch of money. Meanwhile, Ryder is also increasingly doing business with e-commerce companies that require a lot of flexibility when it comes to transportation and logistics. Now, when Ryder reported yesterday morning, the company delivered a 3-cent earnings beat off of $1.62 basis, a good number that somehow the market didn't care for because revenues weren't as high as what some analysts were looking for. So does Ryder deserve the punishment, or is it simply a misunderstood stock that had run up too much going into the quarter, like so many that we've seen? Let's take a closer look with Robert Sanchez, the chairman and COO of Ryder System, to find out more about the quarter and his company's prospects. Mr. Sanchez, welcome back to Mad Money.

Hey Jim, good to see you again. Thanks for having me.

Absolutely. Okay, Robert, I want to understand. I mean, you added a lot to your fleet, you got a lot of new customers, and yet somehow people feel that your revenues weren't where they should have been. Is this just a misinterpretation by the market?

Yeah, I think revenue can be a little confusing because the total revenue line that you're looking at includes fuel, which we resell about 300 million gallons of diesel fuel to our customers. So as fuel prices have come down, that fuel cost and that fuel price has come down for us. It's reflected in lower revenue, and it's a lower price that we sell to our customers, but the profit margin stays similar. So really, the top line being down is all due to the fuel cost and fuel prices being down. If you looked at the operating revenue that excludes fuel, that was actually up 6%, and it was up 6% across each of the business segments.

Yeah, that's good because I think people were very confused because the revenue line did look very weak, and I said to myself, uh oh. But then when I read through the fuel, I realized it's passed through, and that's a mistake. What I'm interested in is, even in a time since we spoke to you last, mentioned CVS, when you're talking about e-commerce, the companies that are involved in e-commerce don't know anything about taking it from A to B, they just know about the product. So how is that working? Who are you working for? What kinds of companies? Is that omnichannel or is that standalone internet companies?

It's really both, Jim. I mean, it's any company that needs help on how to get products from point A to point B is what Ryder can come in and help. So sometimes we're working with traditional retailers and traditional companies that are now finding new ways to leverage e-commerce and to move into the e-commerce space and are looking for partners to help them do that. And then other times we're working with new companies that don't have the infrastructure and are looking for a company that can help them that has some of that infrastructure and can help them build out and start up their e-commerce companies.

All right, this may seem to be an off-the-wall question, but a company that we've had on a bunch of times called United Rentals reported, and it frankly was a disaster. And I am wondering whether there are any complimentary issues between Ryder and United Rentals, because United Rentals took down prisoners with that one, and I was thinking, oh, here's another rental company, they do the same thing. You don't really have a lot of overlap, do you?

Right. I think we got caught in a little bit of that downdraft because United Rentals rents construction equipment primarily, and they really were impacted, from what I understand, from the oil and gas sector, which had a meaningful part of their total revenue. At Ryder, oil and gas is only about 2% of all of our revenue. So our rental business actually was up 8%, and rental by the way is only 10% of the revenues for Ryder, as opposed to United Rentals which was a much larger percent. But our rental business is very healthy. We actually increased the number of units that we were going to add to our rental fleet because of the additional demand we had. So we're dealing with a much broader part of the economy and of a customer base, and really are seeing a very healthy rental environment.

All right, one last question. I want to talk about that health. There are a lot of people who feel that just as the Fed met this week, that the country itself is getting weaker. I see the employment numbers, they look good. I see Ryder's numbers, they look good. There's no weakness going on right now versus say three months ago, is there?

Yeah, remember Ryder is primarily North America based, so we're really dealing with product movements inside North America. And if you look across the typical things that we look at to gauge the economy, which is first and foremost our truck rental business, very healthy. Our truck leasing business, where customers are signing long-term leases on trucks, that's very healthy. We are growing that part of the business more than we've grown in decades. And then our logistics and dedicated business, the volumes with those customers have come up nicely also. So really from our vantage point, the economy looks like it's continuing to move at a pretty good pace.

Well, that's all we need. And I think that there was a kind of a guilt by association, frankly, because I know the space and you have a lot to... there's no real overlap anyway. That's Robert Sanchez, chairman and COO of Ryder Systems. Thank you so much, sir.

Thank you, Jim. Thanks for having me.

All right. Look, people think that this whole sector is problematic, and that's not true. Ryder is not part of a sector, it's a service business that companies need. Mad Money's back in a break. Booyah! Jim Cramer here from Mad Money. Thanks for watching CNBC on YouTube. Click here to subscribe and get the jump on my exclusives with CEOs, plus market news, investing advice, and a whole lot more.