Prepared remarks
Good morning, and welcome to the Ryder Systems Second Quarter 26 Earnings Release Conference Call. All lines are in a listen-only mode until the question-and-answer portion. 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 Ryder. Ms. Candela, you may begin.
Thank you. Good morning, and welcome to Ryder Second Quarter 26 Earnings Conference Call. I would like to remind you that during this presentation, you will hear some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 2000. 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. Detailed information about these factors and a reconciliation of each non-GAAP financial measure to the nearest GAAP measure 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 John J. Diez, Chief Executive Officer; and Cristina A. 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 will turn the call over to John.
Good morning, everyone, and thanks for joining us. The Ryder team delivered our seventh consecutive quarter of comparable EPS growth. Solid results were primarily driven by consistent execution on our strategic initiatives. Improving market conditions in used vehicle sales also contributed to our higher results. I will begin today's call by providing an update on our balanced growth strategy, and I will then provide you with key highlights from our second quarter performance. Cristina will provide you with an overview of our segment performance and discuss our capital spending and capital deployment capacity. I will then review our outlook for 2026. Let's begin with a strategic update. Consistent execution on our balanced growth strategy has demonstrated the resiliency of our transformed model and has enabled Ryder to outperform prior cycles. By executing on our strategy, the Ryder team built a solid foundation that reflects actions taken to de-risk the portfolio, enhance returns and cash flow, and shift to a less capital-intensive, more resilient business mix. Building on this transformed foundation, our strategic priorities remain focused on executing relentlessly, investing in the future, and growing contractual customer relationships. These priorities are aimed at creating value for our customers as well as our shareholders. Operational excellence is where we stand out and what enables us to leverage our full end-to-end capabilities to solve our customers' toughest logistics and transportation challenges. Investing in customer-centric innovation that enables a proactive supply chain gives our customers a competitive advantage. In RyderShare and RyderGyde, we are embedding agentic AI in order to enhance capabilities and drive the evolution of these proprietary platforms. We are also leveraging AI across the company, including FMS customer service and roadside assistance, where agentic AI is enhancing the customer experience while improving effectiveness. Additionally, we continue to deploy automation and robotics in our warehouses to drive operating efficiencies. We are focused on profitably growing our contractual relationships by increasing customer engagement across our portfolio of port-to-door solutions. Over 90% of our revenue is generated by long-term contracts. Our high-quality contractual base has proven to be a key driver of business model resilience over the cycle and reflects the actions taken to de-risk the model and enhance returns. Our transformed model has delivered meaningful outperformance relative to prior cycles, demonstrating the effectiveness of our balanced growth strategy. Our three complementary business segments are leaders in North American transportation, with secular trends that support further growth opportunities. Finally, we are encouraged by the earnings power and resilient performance of our transformed business model and believe that it positions us well to benefit from a cycle upturn. Turning to page 5. 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 EPS of $5.95 and return on equity of 13%. Operating cash flow was $1.7 billion. This was during peak freight cycle conditions. Now let's look at Ryder today. Our revenue mix has shifted toward supply chain and dedicated, with approximately 60% of 2026 expected revenue generated by these asset-light businesses compared to 44% in 2018. As a result of organic growth, strategic acquisitions and innovative technology, our increased 2026 comparable EPS forecast range of $14.40 to $14.80 is more than double 2018 comparable EPS of $5.95. Our return on equity forecast of 18% is also well above the 13% generated during the 2018 cycle peak. As a result of profitable growth in our contractual, lease, dedicated, and supply chain businesses, forecasted operating cash of $2.7 billion is up $1 billion or approximately 60% from 2018. In 2026, the business is expected to significantly outperform prior cycles even when comparing the pre-transformation peak to the current market environment. Moving to key performance highlights from the second quarter. Comparable EPS for the quarter was up 12%, making it our seventh consecutive quarter of comparable EPS growth. Results reflect the strength of our contractual portfolio, benefits from strategic initiatives as well as improving market conditions in used vehicle sales. Return on equity was solid at 17%, in line with our expectations given where we are in the freight cycle. We remain on track to deliver $70 million in incremental benefits from strategic initiatives during 2026. These initiatives are part of a $170 million multiyear program launched in 2024. Consistent execution on these initiatives is the key driver of expected earnings growth this year. And finally, we are encouraged to see continued momentum from improving freight cycle conditions. Contractual sales activity was strong across all three segments, reflecting customer confidence. We continue to see improved fleet management and dedicated sales activity, which had been experiencing sales headwinds due to the extended freight downturn. Supply chain continued to generate strong sales activity with record sales in 2025 and year-to-date 2026, reflecting the value of our solutions. Used vehicle sales results were higher year over year and retail pricing improved sequentially for both trucks and tractors. Commercial rental utilization returned to target levels of 75%, driven by our planned asset management actions. That said, market conditions remain below normalized levels, and geopolitical and macroeconomic factors continue to influence the pace and durability of the recovery. I will now turn the call over to Cristina to further review our second quarter performance.
Thanks, John. Total company operating revenue of $2.7 billion in the second quarter increased 3% from prior year, reflecting contractual revenue growth in supply chain. Comparable earnings per share from continuing operations were $3.73 in the second quarter, up 12% from prior year, reflecting benefits from share repurchases and higher earnings in fleet management. Return on equity, our primary financial metric, was 17% in line with the prior year. Free cash flow increased to $684 million from $461 million in the prior year, reflecting reduced capital expenditures. In Fleet Management Solutions, operating revenue increased reflecting contractual revenue growth partially offset by lower rental demand. Earnings before taxes were $150 million, up 20% versus prior year, reflecting benefits from strategic initiatives on ChoiceLease results as well as strengthening used vehicle market conditions. Used vehicle results reflect the year-over-year improvement and better-than-expected performance. In rental, utilization returned to our targeted level of 75% on a 15% smaller average fleet. Although demand remained below prior year levels and historical seasonal trends, it was the strongest sequential increase we have seen in four years. Rental pricing was up 1% year over year. Fleet Management EBT as a percent of operating revenue was 11.5% in the second quarter, up from prior year but below our long-term target of low teens over the cycle. In used vehicle sales, year-over-year used tractor pricing increased 3% and truck pricing increased 6%. Year-over-year results benefited from a higher retail mix due to elevated wholesaling activity in the prior year to manage aged inventory. In the second quarter, 56% of our sales volume went through our retail channel, up from 50% in the prior year and down from 61% in the first quarter. On a sequential basis, overall pricing was stable for both tractors and trucks, reflecting a lower retail sales mix. However, retail pricing for trucks improved 7% and for tractors improved 3%. During the quarter, we sold 5.1 thousand used vehicles, up 500 units sequentially and down 1.1 thousand units versus prior year, largely reflecting the prior year's elevated wholesaling activity. Used vehicle inventory of 8.5 thousand vehicles declined and is within our targeted inventory range. Used vehicle pricing remained above residual value estimates used for depreciation purposes. Slide 20 in the appendix provides historical sales proceeds and current residual value estimates for used tractors and trucks for your information. In supply chain, operating revenue increased 7% driven by new business, partially offset by lost business in automotive. Earnings before taxes decreased 7% from prior year due to lower automotive results and, to a lesser extent, productivity of new business ramping up, partially offset by benefits from the optimization of our omnichannel retail network. Year-over-year comparisons were challenging in supply chain due to record results in the prior year. Supply chain EBT as a percent of operating revenue was 8.4% in the quarter, at the segment's long-term target of high single digits. In dedicated, operating revenue decreased 3% due to lower fleet count partially offset by higher pricing. Earnings before taxes were below prior year reflecting lower operating revenue and adverse development of prior year insurance claims, partially offset by benefits from strategic initiatives. Dedicated EBT as a percent of operating revenue was 7.9% in the quarter at the segment's long-term high single digit target. Next, let me cover capital expenditures. Year to date, lease capital spending of $605 million was below prior year, reflecting the timing of replacement activity. Our 2026 forecast for lease spending is $1.9 billion reflecting higher replacement activity versus prior year. Year to date rental capital spending of $94 million was below prior year as expected. Our 2026 forecast for rental spending is $200 million. We expect our average rental fleet to be down 11% consistent with our prior forecast. Our fleet remains well below peak levels. We continue to execute asset management actions that can provide us with flexibility to modestly increase rental in the second half of the year if market conditions were to accelerate. In the short term, we can deploy vehicles that are coming off lease or in our dedicated fleet to rental. In the long term, we can increase our rental capital spending later this year, which would primarily benefit earnings in 2027 and beyond. At quarter end, trucks represented approximately 60% of our rental fleet, reflecting our shift in spending towards trucks versus tractors in recent years, as trucks have historically benefited from relatively stable demand and pricing trends. Our full year 2026 capital expenditures forecast at approximately $2.4 billion is above prior year. We expect approximately $500 million in proceeds from the sale of used vehicles in 2026, in line with prior year. Full year 2026 net capital expenditures are expected to be approximately $1.9 billion. Our high-quality contractual base is generating higher earnings and cash flow, which is delevering our balance sheet at a more rapid pace than prior to our business model transformation. This momentum is creating incremental debt capacity given our target leverage range of between 2.5 and 3x. As shown on the slide, over a three-year period, we expect to generate approximately $10.5 billion from operating cash flow and used vehicle sales proceeds. This creates approximately $3.5 billion of incremental debt capacity, resulting in $14 billion available for capital deployment. Over the same three-year period, we estimate $9.5 billion will be deployed for the replacement of lease and rental vehicles and for dividends. This leaves around $4.5 billion, which equates to approximately 45% of our quarter-end market cap available for flexible deployment to support growth and return capital to shareholders. We estimate about half of our flexible deployment capacity will be used for growth CapEx; the remaining will be available for discretionary share repurchases and strategic acquisitions and investments. Our capital allocation priorities remain focused on profitable growth, strategic investments, and returning capital to our shareholders. Our top priority is to invest in organic growth. Aligned with these priorities, year to date we funded lease and rental replacement CapEx of approximately $700 million and returned $406 million to shareholders through buybacks and dividends. Additionally, earlier in the quarter, our board authorized a new discretionary 2 million share repurchase program that replaced a program that was largely completed during the quarter. More recently, our board approved an 11% increase to our quarterly dividend, marking the fourth consecutive year with a double-digit increase. Our balance sheet remains strong with leverage of 259% at quarter end, in our target range and continuing to provide ample capacity to fund our capital allocation priorities. With that, I will turn the call over to John to discuss our outlook.
Thanks, Christy. Turning to our outlook on Page 14. We have raised our full year 2026 comparable EPS forecast by increasing the low end of the range to $14.40 from $14.05 while maintaining the high end at $14.80. Our forecast continues to expect strong earnings performance in our lease, dedicated and supply chain businesses. The increase to our forecast largely reflects an improved outlook and reduced downside risk related to used vehicle sales. With gains now expected to be approximately $40 million for the full year, up $10 million from our prior forecast. This benefit is partially offset by the timing of new business onboarding in supply chain. Our 2026 return on equity forecast is revised to 18% from a range of 17% to 18%. This forecast remains in line with our expectations given current market conditions. Our free cash flow forecast of $700 million to $800 million is unchanged and reflects higher replacement capital expenditures versus prior year. Our third quarter comparable EPS forecast range is $4.00 to $4.20, above prior year of $3.57. Turning to Page 15. Our transformed model is well positioned for earnings growth. We continue to expect 2026 earnings growth to be driven by incremental benefits from multiyear strategic initiatives. These initiatives represent structural changes we are making to the business and are not dependent on a cycle upturn. In 2024 and 2025, we realized $100 million in benefits, leaving $70 million of incremental benefits expected in 2026. This year's benefits will reflect our lease pricing and maintenance cost-saving initiatives in Fleet Management, our margin improvement actions related to our flex operating structure in Dedicated, and optimization of our omnichannel network in Supply Chain. In addition to driving outperformance relative to prior cycles, our transformed model also provides a solid foundation for the business to meaningfully benefit from the cycle upturn. By the next cycle peak, we estimate this potential benefit could be $250 million with the majority expected to come from the cyclical recovery of rental and used vehicle sales and Fleet Management, with additional benefits from higher omnichannel retail volumes leveraging our rationalized footprint. We expect to recognize these benefits over time as freight market conditions improve. We now expect to realize approximately $20 million of upturn benefits in 2026 primarily from higher used vehicle sales results, up from $10 million in our prior forecast. In addition to benefiting our transactional businesses, we also expect additional opportunities for profitable contractual growth as freight conditions normalize and customers seek safe, efficient, and reliable capacity. We have been pleased by the business' resilience and performance over the cycle and are confident each of our business segments is well positioned to benefit from the cycle upturn. In closing, our transformed business model continues to deliver value to our customers and 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 multiyear strategic initiatives. We remain committed to investing in the future with products, capabilities, and technologies that will deliver value to our customers and our shareholders. We are confident our transformed model provides a solid foundation for Ryder to meaningfully benefit from the cycle upturn. That concludes our prepared remarks. Please note, we expect to file our 10-Q later today. At this time, I will turn it over to the operator to open the call for questions.
Questions and answers
Thank you. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. We will pause for just a moment to allow everyone an opportunity to register. And your first question comes from the line of Bascome Majors with Stephens. Your line is now open.
Good morning, and thanks for taking my questions. I would hope we could focus on the supply chain business a bit. A few months ago, there was the announcement of Amazon competing, and I know we have heard your initial comments on that. Big picture, as they have been in that market, maybe repackaging their offering a bit more formally for a few more months, what have you heard from your salespeople? Are they approaching the market differently? Do you still think it is a shared warehouse, retail focus approach to the market, or is there some intent or desire to compete more in the dedicated site stand-up that you think could result in more competitive responses?
Hey, good morning, Bascome. Let me make a few comments, and then I will turn it over to Steve, who can provide deeper insights here. From a supply chain perspective, that business has continued to perform really well on the sales side over the last 18 months. So we have not seen any impact with regards to the types of businesses we are looking to engineer, design, and hopefully launch with customers. The supply chain pipeline continues to be strong, and evidence of that pipeline is moving in one direction — it continues to get stronger. I will let Steve give you more of a forward-looking view of the business.
I think your comments around the focus of where they are looking is more on the retail side. As I think about our business, I have not seen us go up against them yet in any RFQs or opportunities. We do not have clear visibility to all competitors at all times, but I have not heard their name yet. Remember, our solutions are highly customized. These are typically a single box dedicated to a single customer. And 60% of our revenue comes from customers that use more than one service. Typically, we will run a highly engineered warehouse and then offer additional services through our port-to-door capabilities.
If you find that your question has been answered, you may remove yourself from the queue by pressing *1 again. The next question comes from the line of Jordan Alliger with Goldman Sachs. Your line is now open.
Hi, morning. Just curious on Dedicated: what you may be seeing in terms of contract renewals there, retention as well as the pipeline of new business in the context of tighter trucking markets with drivers. Is that flowing additional opportunity to you? And then just on supply chain, I know you touched on it briefly, but when does productivity catch up with the new ramp so that margins could improve again? What is the timing or sequencing?
Thank you, Jordan. On the Dedicated side, we continue to see capacity exit the market and more opportunities come forward. We highlighted last quarter that pipelines are at record levels for us right now. We have seen a number of opportunities where customers that had been running their transportation with for-hire carriers are looking for dedicated capacity and are coming back to us. Most of what we do is specialized in nature — about 70% of our revenue base in Dedicated is specialized — and that value proposition continues to resonate with our customers. Secular trends favor outsourcing on the Dedicated side, whether it is rising costs, tighter driver capacity, or rising insurance costs, all of which bode well for us. We saw improvement in year-over-year comps from a revenue perspective and expect that to continue as we finish the year and into 2027. On the supply chain side, we have had a number of projects that took a little longer to get to full ramp-up; volumes have not been there yet, which has put a drag on our expectations. Some projects expected to launch later in the year are extended into 2027, which impacted our guide for the second half of 2026. I will let Steve provide a little more color on the supply chain ramps.
Jordan, last year Q2 was a record quarter at 9.7% EBT. This quarter we were at 8.4%. A bigger driver of the quarter was the lost automotive business that we talked about earlier this year, and we are still seeing plants continue to retool for EV and ICE vehicles. Some of these ramps take a little more time to work through. Once these volumes bounce back, we expect to be in pretty decent shape.
The next question comes from the line of Robert Salmon with Wells Fargo. Your line is now open.
You had talked that the pipeline is getting better. When I look at the FMS fleet, the active units were roughly flat, but we had seen a sequential decline in ending units overall. Could you talk a little bit about how we should be thinking about active units and what factors caused those to diverge?
Sure. Good morning, Robert. We have seen strong sales activity on the Fleet Management side to start the year. The number of customers coming forward and the closing rates on those opportunities have increased. The pipeline continues to get stronger, and we are seeing sales that should translate into higher fleets going forward. Sales cycles typically take three to six months, so you should see the decline in the active fleet abate and then turn positive as we exit the year. I will turn it over to Tom to give you additional color.
I think John is right. It is really just the timing of sales activity and when those trucks actually hit the fleet. When you sign a new deal, you have to have the truck on order; it takes a quarter or two before sales results flow into your fleet count. We have seen two straight consecutive quarters of positive net sales in Q1 and Q2. Those are good signs that things are starting to change from a sales perspective and from customer confidence to add fleet back. You might see a slight reduction in the fleet until the timing comes in, but we certainly expect fleet to grow near the end of the year and into 2027 based on what we are seeing in sales.
Really helpful. And, John, in your prepared remarks, something jumped out at me: you were talking about being back at commercial rental utilization target levels but with below-normal demand. Should we think about this as the normalized level being raised due to internal initiatives, or is it unique because you are still shrinking the fleet and getting to normalized levels despite suboptimal demand?
Good question. I think this cycle feels a little different; it's kind of a capacity-driven recovery. We have taken actions to reduce the fleet. We highlighted in our prepared remarks that we expect to be down 11% of average fleet on the rental side for the year. What you are seeing is a combination of somewhat better demand activity, more seasonally oriented than we've seen over the last couple years, and the actions we have taken to de-fleet primarily in the second half of last year and into the first half of this year. We do expect demand to continue to build, and we plan to grow the fleet slightly in the second half. Unlike other cycles, we have seen demand show up on the lease and dedicated side, where folks are coming forward; typically, rental would lead. We have seen a rental uptick, and we expect that to continue to build. We're ready to add fleet as soon as rental demand accelerates so we can take advantage of the strong returns that product line provides.
The next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is now open.
Thanks for taking my question. I was curious what you would need to see in the cycle to start sizing the fleet up significantly. Also, I saw solid improvement year over year in truck pricing during the quarter. What further benefit would you need to see there to increase the used vehicle sales outlook? And what have you seen with buying patterns as we approach any changes going into 2027 with the EPA rules?
Thanks for the question. On the used vehicle side, we continue to see good momentum. In Q2, we saw year-over-year improvements in our used vehicle performance: retail pricing on trucks improved sequentially by 7% and tractors by 3%. We expect continued improvement in the second half. If we see an acceleration beyond mid-single-digit improvements, we would feel confident in lifting the guide further. Going into 2027, we expect pricing to continue to accelerate toward the double-digit range year over year. Regarding the rental fleet, this cycle has been capacity driven. We typically see rental demand accelerate first; we are still waiting for that to happen. When it does, we will add equipment and capital to that product line. That is not currently in our guide, but as soon as we see rental demand accelerate, we will act.
The next question comes from the line of Harrison Bauer with Susquehanna. Your line is now open.
Thanks for taking my question. Building off some of the fleet and capital allocation discussion, how much visibility do you have into your capital plan for this year? For example, are all of the lease purchases planned for the year, and what is the opportunity for upside if leasing activity continues to improve? Also, any thoughts on where dedicated fleet might shake out exiting the year and the opportunity for growth into next year?
Harrison, on visibility for the capital forecast, I'd say roughly 75% visibility for the year. As we navigate the third quarter and conditions change, we may update the full-year outlook when we exit Q3 into Q4. Rental is the one we monitor most closely because it's the product where we are most likely to add fleet as demand picks up. Utilization returned to normalized levels, and we have capacity to serve more demand, but we'll need to add fleet as demand continues to pick up. On Dedicated, sales have been strong to start the year. We are seeing tighter driver capacity and some measures tick up, such as turnover and time to find drivers. Our pipeline and sales activity show momentum, so we expect fleet to start flipping positive in the second half of the year, likely in Q4 and into Q1, and continue into 2027. If demand pops across lease, dedicated, and rental, we have access to OEM slots we can take advantage of.
Thanks. Follow-up on used vehicle sales: the retail versus wholesale mix fell back a bit sequentially. What do you expect for the rest of the year on retail versus wholesale, and how much control does the team have in driving more retail versus wholesale sales to capitalize on better pricing?
Our retail/wholesale mix in Q2 was probably the low end of what we'd expect for the full year; it came down about 500 basis points from Q1. Moving forward, we expect to be in the high 50s to low 60s range for retail mix as inventory continues to decline. Ideally, once the market really heats up, we would like to operate in the 70s for retail mix. We have control over the mix through our channels and asset management, and as inventory falls, we should be able to push the retail mix higher.
The next question comes from the line of Brandon Oglenski with Barclays. Your line is now open.
Good morning, and thanks. When you show the three-year outlook with about $4.5 billion available for flexible deployment, how do you balance growth CapEx versus acquisitions? What are the priorities when you think about M&A in the future?
Hi, Brandon. Our priorities remain on profitable growth, so organic fleet growth is the top priority. With the capital available, however, we have more than enough capacity to pursue acquisitions as well. We are always looking for well-run companies that complement our capabilities or expand services. Over the three-year period, we estimate perhaps half of the $4.5 billion will be growth-related and the other half for acquisitions and repurchases.
On the supply chain sales pipeline, it remains healthy. It's roughly flat year over year after a record sales year last year. We had a great start and have seen good quarter-to-quarter performance across verticals: retail sales were up 24% in the quarter, CPG was relatively flat, industrial is adding new names, and we launched a new healthcare account in the quarter. Extremely positive momentum, and we expect to continue to ride that.
The next question comes from the line of Jeffrey Kauffman with Citizens Bank. Your line is now open.
Thank you. John, congratulations on your role. I was curious about customer behavior: you made a decision some time ago to staff the rental fleet more with straight trucks as opposed to tractors. What are your customers asking you for now today versus six or eight months ago given the tightness in capacity and the over-the-road truck market?
Thanks, Jeffrey. We shifted toward straight trucks both deliberately and as a response to market demand after COVID, where we saw acceleration in the e-commerce and last-mile opportunities. We also wanted to be measured in how we fleet up the tractor side because of volatility in the for-hire carrier market. Today, we are seeing better signs on the tractor side, and demand there is starting to move up. We haven't seen a full acceleration yet, but tractor demand is improving. Tom can provide more color across classes.
We continue to be focused on the truck market. Some customers have shifted delivery mechanisms from more tractors to more straight trucks to address the driver market. We've taken advantage of that. However, as we look to add back rental fleet during the upswing, we expect to invest in the tractor space since the tractor fleet has been down materially. Even during the upswing, we expect the fleet to be predominately trucks as a percentage of the total, but we will add tractors where demand supports it.
The next question comes from the line of Scott Group with Wolfe Research. Your line is now open.
Good morning. I wanted to ask about earnings seasonality. There were years with a big pickup in earnings Q3 to Q4. The last couple years have been flatter. The guide this year assumes flat Q3 to Q4. Is this the new seasonality, or is there conservatism and a rebound to the old seasonality might be possible?
Great question. It's a bit of both. You will still see seasonality, but the transformation we've undergone has flattened the earnings profile. Growing dedicated and supply chain, the more asset-light businesses, has structurally reduced seasonality. Second half will still be stronger than the first half — you should expect mid-fifties percent of earnings in the second half — whereas before the second half used to be about 60% of full-year earnings. So expect seasonal impacts, but the transformation has moderated them.
And then two quick items: the $70 million of strategic initiative benefits this year, do you have an early read on next year? Separately, we have clarity on EPA now; do you have views on how that impacts truck ordering or purchasing behavior for customers?
We're not ready to provide guidance for next year yet, but I'm proud of the team and their execution across all three businesses. We expect them to continue delivering. On EPA clarity, we're waiting for OEMs to reveal the price increases for the second half. We expect increases related to the regulatory change plus inflation and tariff-related activity. Once we get OEM pricing clarity, likely in Q3, we will be able to pass through to customers. That clarity should help lease activity and dedicated activity, and longer term, it supports pricing for used vehicles.
The next question comes from the line of Benjamin Mohr with Citi. Your line is now open.
Good morning. Going back to used vehicle sales, it looks like you benefited year over year from a higher retail mix in Q2, and you raised your UVS full-year target to $40 million from $32 million. Can you clarify what's driving that — volume or price, or both? Could you potentially get better retail mix from recent owner-operator exits? Could those exits also result in scrappage that lifts pricing for new sales?
Benjamin, I'll turn to Tom for more color. Overall, our retail/wholesale mix and inventory decline give us control to manage mix. The customers you mentioned do use our retail centers; those buyers are different from wholesale buyers. Tom, please describe observed trends in used vehicle sales and what is driving the improvement.
We are seeing benefits from both price and volume, but more of it is coming from price. Retail sales have improved sequentially throughout the year, and more retail sales give a better result. The overall marketplace inventory is coming down, which benefits price. External factors, such as fuel pricing, interest rates, and geopolitical events, could impact used vehicle sales going forward, so we'll monitor those, but right now we are seeing better retail volumes and pricing.
Follow-up on Supply Chain: can you help clarify the offset to your new guide that looks like a headwind on new business onboarding in SCS? It sounds like some projects that would have come in 2026 were pushed to 2027. Is that the only factor? Are we still expecting a strong Q3 similar to Q2, and how should we think about headwinds and tailwinds for onboarding?
Benjamin, the offset relates to some wins signed earlier that we expected to start in 2026 being pushed to 2027 and lower volumes on a few onboarding activities. We lapped the lost automotive business in Q2, and comps should get better in Q3. Sales remain healthy and the pipeline is strong. Steve can discuss the OEM and retooling dynamics that affect automotive volumes.
The OEMs are a moving target. We saw a little more downtime than expected as some locations plan additional shutdowns in Q3 and Q4. Many deal delays are customer-driven: funding decisions, minimization strategies, or network readiness. These are typically customer-driven timing decisions.
The next question comes from the line of Brian Ossenbeck with JPMorgan. Your line is now open.
Good morning. A couple quick follow-ups on rental: what is the current truck versus tractor mix in rental, and how did utilization trend throughout the quarter? It sounds like you're seeing better activity in the transactional side of the market, so I'm curious about the month-by-month utilization trend.
We saw utilization increase throughout the quarter, with June being the highest. We started April at 72% utilization, finished June at 78%, which gave us 75% for the quarter. Today we are still running in the mid-70s utilization, and we expect to be in that mid-70s range through the balance of the year. In terms of the truck versus tractor fleet, trucks represented approximately 60% of our rental fleet at quarter end.
Brian, as Tom mentioned, we deliberately reduced the tractor fleet earlier in the downturn, which shifted mix toward trucks. That shift has been purposeful given stability and demand trends in trucks, but as demand picks up, we will add tractors where appropriate. We think the rental recovery and used vehicle sales will contribute a significant portion of the $250 million potential cyclical benefit, and we do not foresee requiring dramatic shifts in our fleet mix to realize that — we need the market to come back, especially rental, to capture that upside.
There are no further questions at this time. I would like to turn the call back over to Mr. John J. Diez for closing remarks.
Well, thank you, everyone. Appreciate all the good questions. Thank you for taking an interest, and we will see you out on the road. Take care.
This concludes today's conference call. You may now disconnect.