We just finished our Q4 2014 review of truckload, rail and LTL carriers results and trends (see See US Rail Carriers Enjoy Generally Strong Q4, as Union Pacific Again Leads the Way, Truckload Carriers have Blow Out Q4 on Strong Rate Gains, and Even Less-than-Truckload Carriers Join the Q4 Profit Party.)
It was the third consecutive solidly profitable quarter for carriers across the three modes of rail, truckload, and less-than-truckload.
Of course, Q4 also marked the end of the 2014 fiscal year for most carriers (a few, such as truckload carrier Celadon, operate on different annual calendars)
So we'll take this occasion to once again present some interesting comparisons on operating metrics across each of these three modes for the full year, as shown in the graphic below. Note that net income is based usually on each carrier's total business, which may include other businesses, such as the fast growing intermodal business at JB Hunt.
However, almost always we were able to find or calculate the operating ratio for the specific business segment at hand (truckload, LTL, etc.) at each carrier. The full year 2014 results are shown below.
|2014 US Operating Metrics by Mode
|Average Net Income as a Percent of Sales
|Best Net Income as a Percent of Sales
|Average Operating Ratio 2014
|Average Operating Ratio 2013
|Best Operating Ratio
|Source: SCDigest Analysis
As can be seen, rail carriers as a group are simply far more profitable than truckload or LTL carriers. The average operating ratio, or operating expenses divided by operating revenue, a key metric in the transportation sector, for the rail carriers was an astounding 19 percentage points better than for truckload carriers and more than 25 percentage points better than the LTL sector.
That said, the LTL sector actually has almost made it backed to something like respectable financial results, with an overall net income as a percent of revenue up to 5% in Q4, up from 3.1% in 2013.
As can be seen, average operating ratios, based on the select groups of public carriers we follow, were improved by 1 to 2 percentage points in 2014 versus 2013 for all three modes.
Note: The "average" operating ratio per mode is unweighted, meaning for example that to calculate this number for the truckload sector, we simply add the operating ratios of the seven TL carriers we follow and then divide by seven. Size of the carrier revenues is not factored in.
While all the rail carriers showed strong results, one once again has to be impressed with the continued performance of Union Pacific. Its net income of 21.6% of revenue compares favorably with companies in almost any sector - for example, consumer products giant Colgate-Palmolive achieved net income as a percent of sales of just 13.5% for 2014. And it wasn't that many years ago the rail sector could hardly earn a dime.
In LTL, the results from Old Dominion continue to stand out, as it continues to far outperform the rest of the LTL market. It came in with an operating ratio more 9 percentage points better than the LTL sector average and 3 percentage points better than the truckload sector average.
If you take Old Dominion out of the calculation, its competitors had an average OR of 96%, meaning Old Dominion was more than 12 percentage points better. That in turn means that for every $1 million in revenue, OD drops an extra $120,000 or so to the bottom line than do its LTL competitors on average.
Any Feedback on our Supply Chain Graphic of the Week? Let us know your thoughts at the Feedback section below.