Ryder System, Inc (NYSE: R) Q3 2025 Earnings Call dated Oct. 23, 2025
Corporate Participants:
Calene Candela — Vice President Investor Relations
Robert E. Sanchez — Chairman of the Board and Chief Executive Officer
Cristina Gallo-Aquino — Executive Vice President, Chief Financial Officer, and Principal Accounting Officer
John J. Diez — President and Chief Operating Officer
Steven Sensing — President, Supply Chain Solutions and Dedicated Transportation Solutions
Tom Havens — President, Fleet Management Solutions
Analysts:
Scott Group — Analyst
Ben Mohr — Analyst
David Zazula — Analyst
Ravi Shanker — Analyst
Jeff Kauffman — Analyst
Jordan Alliger — Analyst
Harrison Bauer — Analyst
Brian Ossenbeck — Analyst
Presentation:
Operator
Good morning and welcome to The Ryder System Third Quarter 2025 Earnings Release Conference call. All lines are in 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 Rider. Ms. Candela, you may begin.
Calene Candela — Vice President Investor Relations
Thank you. Good morning and welcome to Ryder’s third quarter 2025 earnings conference call. I’d like to remind you that during this presentation, you’ll hear some forward-looking statements within the meeting 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 and 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 Robert Sanchez, Chairman and Chief Executive Officer; John Diez, President and Chief Operating Officer; and Christy 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 Robert.
Robert E. Sanchez — Chairman of the Board and Chief Executive Officer
Good morning, everyone, and thanks for joining us. The Ryder team delivered our fourth consecutive quarter of earnings per share growth. The third quarter earnings were in line with our expectations, as the operating performance of our resilient contractual businesses and the benefits from our strategic initiatives more than offset headwinds from freight market conditions. The business continues to outperform prior cycles, demonstrating the impact from actions that we’ve taken under our balanced growth strategy to derisk the business, increase the return profile, and accelerate growth in our asset-light, supply chain, and dedicated businesses.
I’ll begin today’s call by providing you with a strategic update. Cristy will then take you through our third-quarter results, and John will review capital expenditures and our increasing capital deployment capacity. I’ll then review our updated outlook for 2025 and discuss how we expect to leverage the strong foundation provided by our transformed business model.
Let’s begin with a strategic Update on Slide 4. We remain focused on creating compelling value for our customers through operational excellence and investment in customer-centric technology, while further improving full-cycle returns and unlocking long-term value for our shareholders. We expect earnings growth in 2025 driven by the operating performance of our resilient contractual businesses and the execution on our strategic initiatives. We are on track to realize the benefits from the strategic initiatives we outlined at the beginning of the year. These benefits are the key drivers of the year-over-year earnings growth expectations.
Long-term secular trends that favor transportation and logistics outsourcing remain strong, and we are well-positioned to benefit from increased domestic industrial manufacturing, as 93% of our revenue is generated in the US. We delivered high teens ROE of 17% for the trailing 12-month period, which is in line with our expectations during a freight cycle downturn. We expect our transformed business model to deliver ROE in the low-to-mid-20s, when market conditions improve for our transactional rental and used vehicle sales businesses, which will enable us to achieve our over the cycle ROE target of low 20s.
Earnings growth from our high-performing contractual portfolio reflects our value proposition as well as our pricing discipline. Over 90% of our operating revenue is generated by multiyear contracts. Our transformed business model has demonstrated its resiliency over this elongated freight cycle downturn, which is going on its fourth year. We are confident that our cycle-tested business model will continue to outperform prior cycles, while providing us with a solid foundation to meaningfully benefit from the eventual cycle upturn.
Consistent execution of our balanced growth strategy is increasing the earnings and return profile of our business, while also growing our capital deployment capacity.
Ample capacity and our strong balance sheet support our capital allocation priorities focused on profitable growth, strategic investments, and returning capital to shareholders. Aligned with these priorities, our board recently authorized a new discretionary 2 million share repurchase program that replaces a program that was largely completed. So far in 2025, we’ve returned $457 million to shareholders by repurchasing approximately 2.2 million shares and paying our dividend. Since 2021, we have repurchased approximately 22% of our shares outstanding and increased the quarterly dividend by 57%. Our new share repurchase program and the dividend increase announced earlier this year demonstrate our commitment to disciplined capital allocation.
Our 2025 forecast range for free cash flow is unchanged at $900 million to $1 billion, which reflects lower year-over-year capital spending and includes an annual cash flow benefit of approximately $200 million from the permanent reinstatement of tax bonus depreciation. Slide 5 illustrates how key financial and operating metrics have improved since 2018, reflecting the execution 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 FMS. Ryder generated comparable earnings per share of $5.95 and ROE of 13%. Operating cash flow was $1.7 billion. This was during peak freight cycle conditions.
Now let’s look at what we’re expecting from Ryder today. In 2025, a year which freight market conditions remain at/or near trough levels, our transformed business model is expected to generate meaningfully higher earnings and returns than it did during the 2018 peak. Through organic growth, strategic acquisitions, and innovative technology, we have shifted our revenue mix towards supply chain and dedicated, with 60% of 2025 revenue expected to come from these asset-light businesses compared to 44% in 2018. 2025 comparable earnings per share is expected to be between $12.85 and $13.05, more than double the 2018 comparable EPS of $5.95. ROE is expected to be approximately 17% up from the 13% generated during the 2018 cycle peak.
As a result of profitable growth in our contractual, lease, dedicated, and supply chain businesses, operating cash flow is expected to increase to $2.8 billion, up approximately 65% from 2018. As shown here, in 202,5 the business is expected to continue to outperform prior cycles even when comparing the pre-transformation peak to the current market conditions. We’re proud of the strong performance of our transformed business model, and believe that executing on our balanced growth strategy will continue to deliver higher highs and higher lows over the cycle.
I’ll now turn the call over to Christy to review our third-quarter performance.
Cristina Gallo-Aquino — Executive Vice President, Chief Financial Officer, and Principal Accounting Officer
Thanks, Robert. Total company results for the third quarter are on page 6. Operating revenue of $2.6 billion in the third quarter, up 1% from prior year, primarily reflects contractual revenue growth in SCS and FMS. Comparable earnings per share from continuing operations were $3.57 in the third quarter, up 4% from $3.44 in the prior year. The increase primarily reflects higher contractual earnings and the benefit from share repurchases.
Return on equity, as Robert previously mentioned, our primary financial metric was 17% up from prior year, reflecting higher contractual earnings and share repurchases partially offset by lower rental demand and used vehicle sales results. Year-to-date, free cash flow increased to $496 million from $218 million in the prior year, due to reduced capital expenditures and lower income tax payments.
Turning to Fleet Management results on page 7, Fleet Management Solutions’ operating revenue was in line with prior year. Pre-tax earnings in fleet management were $146 million, up year-over-year, reflecting higher choice lease performance, driven by pricing and maintenance cost savings initiatives partially offset by lower used vehicle sales and rental results. We continue to see progress on our pricing and maintenance cost initiatives and remain on track to achieve the benefits targeted for this year.
Rental results for the quarter reflect market conditions that remain weak. Rental demand increased sequentially, but the increase was below historical seasonal demand trends. Rental demand this quarter was also lower than last year. Rental utilization on the power fleet was 70%, down slightly from prior year of 71% on an average active power fleet that was 6% smaller. Lower rental demand was partially offset by higher rental power fleet pricing, which was up 5% year-over-year. Fleet management EBT as a percent of operating revenue was 11.4% in the third quarter, below our long-term target of low teens over the cycle.
Page 8 highlights used vehicle sales results for the quarter. Year-over-year, used tractor pricing declined 6%, and truck pricing declined 15%. On a sequential basis, pricing for tractors was unchanged, and pricing for trucks increased 7%. Sequential pricing benefited from a higher retail mix as we realized better proceeds using the retail sales channel versus the wholesale channel. In the third quarter, 54% of our sales volume went through our retail sales channel, up from 50% in the second quarter. As a reminder, in the second quarter, we exited out of some aged inventory and increased our level of wholesaling activity. Our retail mix is still below prior-year levels of 68%, reflecting ongoing weakness in market conditions.
Pricing in our retail sales channel declined 4% sequentially for tractors, and was unchanged for trucks. During the quarter, we sold 4,900 used vehicles, down sequentially, and up versus prior year. The sequential decline was driven by the actions we took in the second quarter to sell aged inventory. Used vehicle inventory of 8,500 vehicles was in our targeted inventory range. Used vehicle pricing remained above residual value estimates used for depreciation purposes. Slide 19 in the appendix provides historical sales proceeds and current residual value estimates for used tractors and trucks for your information.
Turning to supply chain on page 9. Operating revenue increased 4% driven by new business in Omnichannel retail. Supply chain earnings decreased 8% from prior year, as the benefits from operating revenue growth were more than offset by E-Commerce network performance and higher medical costs. Supply chain EBT as a percent of operating revenue was 8.3% in the quarter, at the segment’s long-term target of high single-digits.
Moving to dedicated on page 10. Operating revenue decreased 6% due to lower fleet count, reflecting the prolonged freight downturn. Dedicated EBT was in line with prior year, reflecting acquisition synergies offset by lower operating revenue.
DTS results continued to benefit from strong performance of our legacy dedicated business, reflecting pricing discipline as well as favorable market conditions for recruiting and retaining professional drivers. DTS remains on track to realize the benefits from the cardinal acquisition synergies. Dedicated EBT as a percent of operating revenue was 7.8% in the quarter, at the segment’s long-term high single-digit target.
I’ll now turn the call over to John to review capital spending and capital deployment capacity.
John J. Diez — President and Chief Operating Officer
Thanks, Christy. Turning to Slide 11, year-to-date, lease capital spending of $1.2 billion was below prior year. Rental capital spending of $271 million was also below prior year levels, reflecting weaker freight market conditions. For full-year 2025, lease spending is expected to be $1.8 billion, reflecting lower lease sales activity. Lease spending is expected to be down approximately $200 million from prior year, reflecting the prior year impact of OEM deliveries from vehicle orders in 2023.
We expect the ending lease fleet to remain fairly consistent with current levels by year-end. Forecasted rental capital spending is approximately $300 million, down from prior year. By the end of this year, our ending rental fleet is expected to be down 12% and our average rental fleet is expected to be down 5%. The rental fleet remains well below peak levels as we manage through an extended market downturn.
In rental, we’ve continued to shift capital spending to trucks versus tractors. As of the third quarter, trucks represented approximately 60% of our rental fleet. Our full-year 2025 gross capital expenditures forecast of approximately $2.3 billion is below prior year. We expect approximately $500 million in proceeds from the sale of used vehicles in 2025. And full-year net capital expenditures are expected to be approximately $1.8 billion.
Turning to page 12. In addition to increasing the earnings and return profile of the business, our transformed contractual portfolio is also generating significant operating cash flow. Improving the overall cash generation profile of the business is one of the essential elements of our balanced growth strategy. Better earnings performance is driving higher cash flow generation and, in turn, is delevering our balance sheet at a more rapid pace. This momentum is creating incremental debt capacity, given our target leverage range of between 2.3 times and 3 times.
As shown on the slide, over a three-year period, we now expect to generate approximately $10.5 billion from operating cash flow and used vehicle sales proceeds.
Our operating cash flow will benefit from improving contractual earnings. This creates approximately $3.5 billion of incremental debt capacity, resulting in $14 billion available for capital deployment. Over that same three-year period, we estimate approximately $9 billion will be deployed for the replacement of lease and rental vehicles and for dividends, leaving $5 billion of capital available for flexible deployment to support growth and return capital to shareholders. We estimate about half of this capacity will be used for growth CapEx, and the remaining to be available for discretionary share repurchases, and strategic acquisitions, and investments.
Our capital allocation priorities remain unchanged, and are focused on supporting our strategy to drive long-term profitable growth and return capital to shareholders.
Our top priority is to invest in organic growth. We’ve taken a balanced approach to Investing and, since 2021 have invested approximately $1.1 billion in strategic M&A, and have deployed approximately $1.2 billion for discretionary share repurchases, reducing our share count by 22%. Our balance sheet remains strong, with leverage of 254% at quarter end, at the lower end of our target range, and continues to provide ample capacity to fund our capital allocation priorities.
With that, I’ll turn the call back over to Robert to discuss our outlook.
Robert E. Sanchez — Chairman of the Board and Chief Executive Officer
Turning to our outlook on page 13. Our full-year 2025 comparable EPS forecast is updated to a range of $12.85 to $13.05 above the prior year of $12 as higher contractual earnings benefits from our strategic initiatives, and lower share count more than offset the impact from market conditions in rental and used vehicle sales. Our updated forecast continues to reflect contractual earnings growth, as well as a muted environment for used vehicle sales and rental.
Although sales pipelines remain strong, the prolonged freight downturn and economic uncertainty continue to cause some customers and prospects in lease and dedicated to delayed decisions. These near-term contractual sales headwinds are consistent with current freight market conditions. We are, however, encouraged by robust sales and pipeline activity in SCS.
Our 2025 ROE forecast is unchanged at 17% and is in line with our expectations given current market conditions. As mentioned earlier, our free cash flow forecast of $900 million to $1 billion is unchanged from the prior forecast and reflects lower capital expenditures in 2025, and an estimated annual benefit of $200 million from the permanent reinstatement of tax bonus depreciation. Our fourth quarter comparable EPS forecast range is $3.50 to $3.70 versus a prior year of $3.45.
Turning to page 14, the key driver of expected earnings growth in 2025 is incremental benefits from multi-year strategic initiatives that are well underway and related to our contractual lease, dedicated and supply chain businesses. They represent structural changes we’re making in the business, and are not dependent on a cycle upturn. Upon completion, we expect these initiatives to generate annual pre-tax earnings benefits of approximately $150 million, which will be a key component to achieving our long-term ROE target of low 20s over the cycle.
In FMS, we expect to realize an incremental annual benefit of approximately $20 million in 2025 from our lease pricing initiative.
This results in a total benefit of $125 million relative to our 2018 run-rate, reflecting portfolio pricing under the new model. We expect $50 million in benefits over multiple years from our maintenance cost savings initiative announced in mid-2024. In DTS, we expect to realize $40 million to $60 million in annual synergies from the Cardinal acquisition at full implementation. The majority of these synergies are related to maintenance efficiencies and replacing third-party operating leases, with the benefits of rider ownership and asset management.
In SCS, we are focused on optimizing our omnichannel retail warehouse network through continuous improvement efforts, driving operational efficiencies, and better aligning our footprint with the demand environment.
During the third-quarter, we incurred some incremental costs related to the optimization of our network, but expect continued progress on this initiative with incremental benefits expected in 2026. By year-end 2025, we expect to realize approximately $100 million from these initiatives, benefiting all three business segments. Approximately $70 million of these benefits are incremental to 2024.
In addition to driving our outperformance relative to prior cycles, our transformed business model also provides a solid foundation for the business to meaningfully benefit from the eventual cycle upturn. As such, we expect an annual pre-tax earnings benefit of at least $200 million by the next cycle peak. The majority of the $200 million benefit is expected to come from the cyclical recovery of rental and used vehicle sales in FMS.
In dedicated, Improved driver availability and lower recruiting and turnover costs are benefiting earnings, but have been a headwind for new sales and revenue growth. As freight capacity and driver availability tighten, we expect to see incremental sales opportunities and improved revenue growth in DTS as private fleets seek solutions to address these challenges. In supply chain, muted volumes in our E-commerce network have been a headwind to revenue and earnings. We expect supply chain results to benefit as volumes from these services recover, and our optimized warehouse footprint is leveraged.
We’ve been pleased by the business resilience and performance during the prolonged freight market downturn and are confident each of our business segments is well-positioned to benefit from the cycle upturn.
Turning to page 15, our transformed business model continues to deliver value to our customers and our 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 products, capabilities, and technologies that will deliver value to our customers and our shareholders. That concludes our prepared remarks. Please note that 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.
Questions and Answers:
Operator
[Operator Instructions] We’ll pause for just a moment to allow everyone an opportunity to signal for questions and our first question will come from Scott Group with Wolfe Research.
Scott Group
Hey thanks. Good morning. Want to ask how you think these CDL regulations impact the business model? What are the puts and takes? I don’t know if you have like a sense on the lease side of the business like are you more exposed to large fleets, private fleets, small fleets where there may or may not be less exposure. And do you think there’s risk that if there’s fewer drivers that could pressure used truck pricing? I don’t know, just some of the puts and takes?
Robert E. Sanchez
Yeah, Scott, I think that’s still developing, but I would say that, what it likely to do is tighten the driver market. The drivers that are impacted. Just for purposes of our supply chain and dedicated business, we don’t have any of those types of drivers in our company. So tighter driver market typically is good news for our dedicated business, as you’re more likely to have companies looking for help on how to bring those drivers in. As far as our customer base on the lease side, let me hand that over to to John, so he can give you a little more color on that.
John J. Diez
Yes, Scott, the majority of our lease portfolio if you think about it, there are private fleets that are doing specialized deliveries, whether they’re food distributors or even local deliveries. Most of what we think is going to get impacted is that over-the-road transport space, which are doing dock-to-dock deliveries that don’t require special handling. So, I would say the majority of it is not impacted by this. Our estimates based on the number of CDL drivers out there can be as much as 5% impact to the overall capacity.
So, not expecting a meaningful change there to our customer base, but certainly will put pressure on wages over time. And I think that will favor more outsourcing activity for our business, both on the dedicated side as well as individuals looking to cut cost and coming to us for either their fleet maintenance or dedicated solutions.
Scott Group
Okay. And Robert, I know you usually on the Q3 call you give at least some thoughts perspective on the next year. We’ve had some multi-year initiatives, like some of those, like the lease pricing, kind of think this is the final year of it. The fleets sort of shrinking a little bit as the year plays out. So what are the drivers of earnings growth next year? Are there headwinds to be thinking about? Just overall puts and takes? Do you think about ’26 earnings growth potential?
Robert E. Sanchez
Yeah, as I was going into this call, I thought there would be a lot more clarity this year than there was last year, given we had an election coming up last year. So there’s still a lot of uncertainty. But, but I would tell you is a very similar story in that you should expect contractual earnings growth. Really, we have $50 million left in our strategic initiatives of $150 million. So you should expect a good chunk of that, if not all of it, to really come in next year.
In addition to that, although we’ve had some muted sales and lease and dedicated because of the freight market softness and extended downturn, the really strong part of the story this year is supply chain.
We are seeing a very strong sales here and supply chain this year. It’s on pace to be one of our best sales years. So those contracts should start coming in, as we go into next year, probably second, third quarter, we’ll start to see more of them come in. But I would expect revenue and earnings growth really driven by the supply chain side, next year. And then on the transactional side, it’s really. When do we think the freight cycle is gonna turn? And we’re now in our, we’re gonna be on our fourth year of a downturn.
So at some point it will, if it happens earlier in the year, we’ll get some boost from our rental and used vehicle. If it happens later in the year, we’ll get less. But it’s really that $200 million of incremental earnings that we’re expecting by the time we hit our next peak.
When that turn happens, you’ll start seeing some of that. It doesn’t all come in the first year, but you’ll start seeing some of that. And there’s still not a lot of certainty of when we’re going to see that. But one of the things you mentioned around tighter market could be more capacity coming out of the spot market, which is probably a good thing for the overall freight market.
As you know, we have zero-based budgeting here. So would you expect us to continue to manage our overheads and look for cost takeouts there? If it is a slower — if it is a slow market from a freight market standpoint, so we don’t see an upturn. Then you should expect another strong free cash flow year unless we see a big freight rebound. I think that’s probably in, it’s probably in the cards for us next year. Another strong free cash flow year. And then also continued share repurchase. So, really continued execution on our balanced growth strategy, which is I think has given us really good results so far, and we’ll continue to do so.
Scott Group
Thank you, guys.
Robert E. Sanchez
Thank you.
Operator
[Operator Instructions] And our next question will come from Ben Mohr with Citi.
Ben Mohr
Hi, good morning. Thanks for taking our question. Wanted to touch on more about your used gain being challenged in the quarter. In thinking about 4Q and 2026, can you share how you frame thinking about the truck tariffs? Presumably, you could allocate purchases towards US-made trucks. USMCA compliance can alleviate tariffs on foreign-made trucks. You’ve got higher new truck pricing that should lift your used truck prices, and you can possibly pass-through to customers higher new truck pricing, given the strong truck leasing industry pricing discipline, and also private fleets would probably want to outsource more to you.
It’s more economical to lease and buy. Can you walk us through kind of maybe, some of these points and what you’re thinking, the puts and takes, whether it could be an overall benefit?
Robert E. Sanchez
Yeah, but first, I’ll say that we still don’t have clarity on what the impact on the pricing is going to be and how much of any of it will be passed through. But I think you hit on some of the key points that number one, if there is a price increase, and I think there’s market dynamics here, so all the OEs, regardless of where they’re doing their final manufacturing, will have to compete in the marketplace with those that may be doing more domestic versus across the border.
But any increase that we see, obviously, we pass through in our lease rate with our customers, we’re not buying trucks until we have signed leases. Those increases will likely, if they do happen, will slow down the purchase of new trucks, I would expect which should give, which should accelerate getting the supply of trucks in the market down to where they need to be. So that could help accelerate the balance of the freight market.
But for Ryder, just as importantly, the cost of used equipment and used equipment that was purchased prior to the tariffs should be more valuable, and we should see some help on the used truck side, over time, as the higher pricing of new trucks comes in.
So those are the big ones. I think at the end, complexity at Ryder is our friend. And I think the uncertainty has not been our friend, just like it’s, uncertainty is not a friend of any business. But more complexity is good for us, and certainly we’re seeing plenty of it coming down the pipe with some of this tariff talk, also some of the changes in driver regulations and qualifications, and who could be a driver. So those things, over time, really I think make the work that we do more complex, which should bode well for outsourcing and should bode well for companies like ours.
Ben Mohr
Great. Really appreciate that. Maybe as a follow-up, just thinking longer term capital structure-wise, as you shift your mix to more supply chain and dedicated, how might you think about maybe kind of trending down your leverage target to be more in line with your supply chain and dedicated peers? It looks like most of them have leverage around 0 to 1 times to 2 times.
Robert E. Sanchez
Yeah, that’s a good question. But I think if you look at our balance sheet, you can see that the majority of the capital that we’re spending is still heavily weighted towards our FMS business. The good news is the profitability of that business has significantly improved. So the contracts that we’ve signed over the last now five, six years are certainly more profitable than what we had historically. So that allows us to continue, to continue to hold our leverage and keep our leverage where it is, even as there’s been a shift in certainly the revenue and earnings for the company.
So, John, you want to add something to that?
John J. Diez
Yeah. And Ben, I think right now we’re at the lower end of our target range. You should expect once the freight market recovers, we are going to be spending more capital to not only replenish the fleet, but grow the fleet both for lease and rental. So you will see our leverage move up within the range, as we kind of upcycle the business. So that’s kind of one of the dynamics here is we’re on the trough end of the cycle, which you’re seeing us on operate towards the latter end. It will take multiple years, I would say, before we start seeing a meaningful impact to our capital structure from the growth that we’re seeing in supply chain and dedicated.
Ben Mohr
Great. Really appreciate that. Thank you.
Robert E. Sanchez
Thank you, Ben.
Operator
Thank you. And moving on to David Zazula with Barclays.
David Zazula
Hey, thanks for taking my question for Steve and Christy. Robert’s comments suggested a pretty positive outlook for supply chain solutions, kind of into the quarter and next year. Can you contrast that with some of the headwinds you saw this quarter? Were they temporary? Is some of the revenue going to be able to offset the poor network performance in e-commerce? Just any color you can provide there. Thank you.
Robert E. Sanchez
Steve?
Steven Sensing
Yeah, David, as you look at it, we had our ninth consecutive quarter of EBITDA earnings last quarter. We remain in high-single-digit. I’d really put it in three buckets. We had higher medical costs in the quarter in e-com there was a productivity miss really associated with a couple of accounts where volumes were lower than what was forecasted. And then, as Robert said in our strategic initiative is a continued optimization of our multi-client e-commerce and right or last-mile footprint. We did have some customers that requested to move earlier in the year.
So we’ve got some moves going on here in the second half where we had planned those to happen in Q1, but we didn’t want to accommodate them. So a little bit of higher move and shutdown cost as well.
David Zazula
Super helpful.
Cristina Gallo-Aquino
I’ll add to that. Oh, David. No, I was just going to add to that that in the forecast that we’ve provided for the fourth quarter, what we’re expecting there on the high-end of the range is that rental will continue, kind of at this flat sequential demand environment. And on the UBS side, on the high end, there would be some market improvement and also some benefit from us shifting to more retail mix on the used vehicle side. And then on the low-end, it would just be that demand drops below Q3 levels, so a declining environment, and that used vehicles also have a modest decline.
David Zazula
Very helpful. And then, just if I could squeeze one in on SelectCare. It seems like there’s some headwinds in SelectCare there. I guess one can maybe discuss whether we should think of those as temporary, or is there something going on there? And then, should we think of SelectCare as being more volatile than it historically has been? It’s been a pretty consistent grower over time. So, anything you can provide there on the SelectCare? Thanks.
Robert E. Sanchez
Yeah, I’ll let Tom give you color. But remember, SelectCare has a component that’s contractual and then another component that is more the rebillables or the more transactional part is we’ve got customers that need bodywork and other types of work to do, but go ahead.
Tom Havens
Yeah, so I would view it as temporary. As we looked at the quarter, it was just lower activity and, as Robert mentioned, that lower activity in the transactional forms of SelectCare, and we certainly expect that to return to more normal levels in the fourth quarter.
David Zazula
Great, thanks so much.
Operator
And the next question will come from Ravi Shanker with Morgan Stanley.
Ravi Shanker
Hey, thanks, guys. Just a follow-up on the non-domicile CDL rule. Understand that you said it’s a very direct impact for you guys, but how do you think about the timing and maybe the indirect impact? If you can kind of rewind a little bit to 2018 with the ELD mandate and the 2020 Drug & Alcohol Clearinghouse, when there were regulatory changes in the industry that impacted small truckers. How quickly did that kind of the second derivative fly up to you guys? And also, how — What’s the timing that you think this impact will take place? Is this something that happened right away? Is it ’26? Is it going to take several years? What are you guys thinking right now?
Robert E. Sanchez
Yeah, those are good questions, but it’s hard to tell at this point still. Right. We don’t know what the timing of this is, but the estimates are that it’s 5% of the driver market that could come out over the next couple years. So it’s probably not something that happens overnight. It happens over a period of time. And whenever there’s been a tightening of the driver market, it’s typically good news for outsourcing.
So again, we would expect to see some improvement — which much-needed improvement, I would tell you, on demand for dedicated services. And that’s an area that, as the market tightens up, you should see that.
You should also see an increase in the transactional parts of our leasing business, rental, and used vehicle sales. Because, as some of those drivers that are maybe one-way and our typical truckload type fleets go down, some of the private fleets are going to have to pick up the slack. And we’ve seen that tilt over the last couple of years more towards the for-hire driver; you may see that come back towards the private fleet, which would benefit our leasing customers and our dedicated business.
Ravi Shanker
Understood. And as a follow-up to that, just on that point of private fleets, I think there’s been some speculation about private fleet growth over the years. And yesterday, we may have heard that there are some signs that maybe private fleets may be kind of giving back, just given cost inflation and other issues. What do you think are some of the structural trends in private fleet growth right now, and kind of how do you think that lasts through the upcycle?
Robert E. Sanchez
Yeah, I think we’ve seen that in our lease fleet, in our dedicated fleet over the last several years, as coming out of COVID. There were a lot of trucks that were ordered that came in that probably our customers didn’t need them all at that point, once the COVID high came down. So you’ve seen those fleets deep, fleeting over the last two to three years, and we believe that’s probably getting closer to the tail end of it now. But yeah, there’s no doubt that private fleets have been deflating over the last two to three years.
Ravi Shanker
Understood, thank you.
Operator
And we’ll take a question from Jeff Kauffman with Vertical Research Partners.
Jeff Kauffman
Thank you very much. Congratulations everybody. I just wanted to focus a little bit on the bonus depreciation. How is that going to funnel into the financial statements? Is it just going to be a cash flow benefit? Is it going to help the operating margins, and how is that going to accelerate? I think you mentioned a $200 million benefit. Maybe I’m wrong, but I just kind of want to get a better idea how that’s going to flow through the financials?
Robert E. Sanchez
Cristin.
Cristina Gallo-Aquino
Yeah. Hi, Jeff. So yes, the bonus depreciation right now for us is going to be a cash tax benefit, and we are estimating that to be about $200 million. We would expect that at the same level of capital spending in future years, it would continue to be about $200 million in the next several years. So that’s the way it’s going to flow through our financial statements. There is no tax rate effect of this. And from our operating margins, I mean, we continue to price our leases at market rates. So there really isn’t a meaningful impact. It’s just a cash timing benefit that we’re going to be getting.
Jeff Kauffman
All right, and the $200 million number is an annual number, correct?
Cristina Gallo-Aquino
That is correct. Yep.
Jeff Kauffman
Okay, that was my only question. Thank you.
Robert E. Sanchez
Thank you, Jeff.
Operator
And our next question comes from Jordan Alliger with Goldman Sachs.
Jordan Alliger
Yeah. Hi. Morning. Just wanted to come back to Supply chain for a second. You mentioned, the margins were in the high single-digit target for the third quarter. You mentioned the E-Commerce network productivity or performance. Is that something that just is isolated into the third quarter and it drops off, and we could get back to some, some sort of a sequential improvement from here, or is it sort of linger on?
And then secondly, you commented that supply chain sales pipeline has been really strong and could start impacting in the 2Q,3Q next year.
Can you talk a little bit about the trade-off if you start getting back to the revenue growth targets that you like to see longer term? Is there a trade-off with margin on startup, or can we hold these high single-digits as that starts to flow in? Thanks.
Robert E. Sanchez
Yeah, I’ll let, I’ll let Steve. So I’ll tell you the last part of that. I do think we’re, we’re certainly excited about the growth. We are not changing our earnings leverage targets, though, for supply chain. So I still would expect same earnings leverage targets just to be, it’s going to be nice to get back closer to our target growth rates. But go ahead, Steve.
Steven Sensing
Yeah, I think in the quarter you think about Q4, there’s going to be some continued optimization of the footprint, specifically in e-commerce and Last Mile. So I think that would continue, but it would set us up for a rebound in 2026. We also are seeing in the second half a few more plant shutdowns in automotive, as they retool and move models around to different plants. So that’s another one didn’t really stand out in the quarter, but that’s some items that we’re seeing here in the back half.
Jordan Alliger
Thank you.
Operator
And our next question will come from Harrison Bauer with Susquehanna.
Harrison Bauer
Great. Thank you for taking my question. You’ve laid out your peak-to-trough market improvement opportunity of around $200 million, and that was off a 2024 base, with used vehicle sales down on the gains part, or maybe $50 million this year in rental earnings contributions, also down notably. Do you think that peak-to-trough opportunity might be close to $300 million if we rebase the transactional earnings contribution to 2025?
John J. Diez
Yeah, Harrison, this is John. I think your observations are directionally accurate in that if you think about where we were in ’24 from a gains perspective and where we’re sitting today, obviously, we’ve had a pullback in our UBF gains. As a reminder, our expected normalized gains annually are in that range of $75 million. So clearly more opportunity on the UBF side relative to where we were back in 2024. Rental has also taken a step back since then, which would suggest that it’s a little bit more than the $200 million that we originally had calibrated.
So we are going to need to make investments to grow the rental fleet, and continue to invest in that fleet over time, which factors into that $200 million. But you’re absolutely right. The $200 million is maybe not reflective of where we sit today, which is more depressed than where we were a year ago.
Harrison Bauer
Thank you. And as a follow-up to the non-domiciled CDL conversation, appreciate how you mentioned how the removal of drivers would impact different parts of your business. But what do you think the sort of other side of that, where there might be additional trucks to the market, and how that might affect used vehicle prices? Thank you.
Robert E. Sanchez
The question is additional trucks as a result of having fewer drivers?
Harrison Bauer
Correct, yeah, like the displacement of drivers and what might happen with those trucks, and any pressure to use vehicle prices or residual values.
Robert E. Sanchez
Oh, I said. So you’re saying that. Yeah, there’d be more used trucks in them, are — Yeah, I think that would be. I mean, time will tell, but I think that would be more than offset by just the benefit of more trucks needing to be there to replace them. Right. You’re gonna have to — You’re gonna need more newer trucks or less or newer model year trucks to replace them. So yeah, it’s hard to tell exactly how it all falls out, but generally I would tell you that as the market tightens for drivers, that is a good thing for used trucks, and that’s a good thing for our rental business.
Operator
And our next question will come from Brian Ossenbeck with J.P. Morgan.
Brian Ossenbeck
Hey, good morning. Just wanted to ask for a little bit more specifics on the rental demand. I think you said it was a little bit weaker than seasonal. I don’t know if you can call it anything in particular there. And similarly for the e-comm. Sounded like it was a productivity miss on maybe volume. So, is there anything within that vertical that you can read into, or is this more of a one-off from a specific customer, and whatever their forecast was and whatever that warehouse was supposed to look like, but evidently didn’t deliver?
Robert E. Sanchez
So I’ll let Tom address the rental. What we saw in the quarter versus what we expected.
Tom Havens
Yeah, Christy mentioned it a little bit in her opening comments, but the third quarter was slightly down from our expectations and slightly worse than what we would typically see from a seasonal demand trend by about a percent. If you look at the trend year-over-year, you can see that. So, as you step off into the fourth quarter here on that slightly lower demand, that’s reflected into the fourth quarter forecast as well. So it’s a little bit worse than what we had expected.
Robert E. Sanchez
And certainly well off of our target of where we want to be from a utilization standpoint. Steve, you want to address the e-com?
Steven Sensing
Yeah, Brian, I’d say that productivity miss to a forecast was really a one-off situation in the quarter.
Brian Ossenbeck
And I guess just on the rental demand, if it was worse, and I appreciate your updating the guidance for the run rate. But what is there anything in particular that surprised you to the downside? Was it a combination of things? Anything you can really point to?
Tom Havens
Yeah, I guess there’s good and bad in the detail of the data, but the good point is our pure rental business year-over-year. The demand for our non-lease customers renting trucks was flat year-over-year. So what we’re seeing is our lease customers haven’t picked up their demand, and we certainly haven’t signed lease sales have been a little bit muted, and we would typically have await new leases, as we sign new business.
So those are the two areas that were down in demand. The other good point here, and you saw it in, you saw it in the numbers, the RPD was up about 5% so we are seeing good rate discipline in rental. So, I think when we see our lease customers start to rent again, that’ll be a really good sign for us.
Brian Ossenbeck
Good. Thank you, Tom.
Operator
And we’ll take a question from Ben Mohr with Citi.
Ben Mohr
Great, thanks for bringing me back in. Just looking at the bright side, your strong sales performance in SCS, and you seem very excited about SCS leading growth in 2026. Can you talk more about your recent developments in your incubator for tech? You know that had developed your Ryder guide, Ryder share Rydership, and tech-driven sales. In our research, it looks like load board and broker apps using AI been supporting one truck owner operators, and be curious to hear about similarity with your tech supporting your logistics managers and the outsourcers that you serve.
John J. Diez
Yeah, Ben, John Diez here. Two components to your question. One around tech. Clearly, what we’re seeing, the investments we’re making in Ryder share, Rydership, and some of the other technologies that our customer-facing is making a difference. That’s really a big differentiator in what we’re seeing in the sales activity. We are starting to see large customers take action in reshaping their supply chain. So these technologies are making a difference in those opportunities and how we compete.
With regards to the second part of your question around AI, clearly we’re deploying some of these technologies especially around Agentic AI technologies, with regards to improving our service levels and improving the effectiveness of some of our solutions specifically around our transportation management and brokerage Part of the business, that’s making a difference in optimizing rate for our customers, improving our overall service levels, as well as improving our effectiveness around our freight bill audit and pay activity there.
So you are seeing that in the supply chain space as well as some of the activities we’re deploying to other parts of the business, including fleet management and dedicated.
Ben Mohr
Great. Thanks very much.
Operator
And our last question comes from Scott Group with Wolfe Research.
Scott Group
Hey, thanks. Just real quick, can you just let us know what’s in the guidance for gains in the fourth quarter? And it’s always a little hard to know what that slide on the residual values, like how much cushions left to stay within the ranges on residuals, before we risk either losses or having to do something with depreciation assumptions.
Cristina Gallo-Aquino
Yeah. Hi, Scott. So, on the guidance itself, well, first let me remind you, in the quarter, pricing was somewhat stable, and at this level, we’re still maintaining gains on the P&L. So I would expect the fourth quarter to be similar or somewhat better because we are expecting on the high end, a modest improvement in pricing. So we think that it will be higher than the third quarter results.
As far as how much can we sustain. The sensitivity right now is we would need pricing to decline 8% from where it is today in order to hit the bottom end of our residual levels. We are not anticipating a decline. And so right now that’s not what we’re forecasting, but that is the amount that it would need to decline to hit the bottom end.
Scott Group
Okay, so it doesn’t sound like it, but just to be sure, you’re not planning any residual assumption changes or changes in accelerated depreciation or anything like that for next year?
Cristina Gallo-Aquino
That’s right. Right now, we’re comfortable with our residuals where they’re at.
Scott Group
Okay, perfect. Thank you, guys. Appreciate it.
Operator
At this time, there are no additional questions. I’d like to turn the call back over to Mr. Robert Sanchez for closing remarks.
Robert E. Sanchez
Okay, well, thank you. We’re near the top of the hour, so thanks again for your ongoing interest in Ryder and great questions. Talk to you guys soon.
Operator
Thank you. That does conclude today’s conference. We do, thank you for your participation. Have an excellent day.