It was the fourth consecutive solidly profitable quarter for carriers across the three modes of rail, truckload, and less-than-truckload.
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 truckload carrier 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, which is what is used in the table below. The operating ratio, or operating expense divided by operating revenue, is a key metric in the transport sector.
|Q1 2015 US Operating Metrics by Mode
|Average Net Income as a Percent of Sales Q1
|Best Net Income as a Percent of Sales Q1
|Average Operating Ratio Q1 2015
|Average Operating Ratio Q1 2014
|Best Operating Ratio Q1
|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 for the rail carriers was an astounding 18 percentage points better than for truckload carriers and more than 24 percentage points better than the LTL sector.
In Q4 2014, the beleaguered LTL sector actually has almost made it backed to something like respectable financial results, with an overall net income as a percent of revenue of 5%, but that fell back to just 3.2% in Q1, due i n part to another big loss at YRC Worldwide.
As can be seen, average operating ratios, based on the select groups of public carriers we follow, were improved by 1 to 3 percentage points in Q1 2015 versus 2014 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 20.5% of revenue compares favorably with companies in almost any sector - for example, consumer products giant Proctor & Gamble achieved net income as a percent of sales of just 11.8% in the quarter. And it wasn't that many years ago the rail sector could hardly earn a dime.
In the truckload sector, Knight Transportation's operating ratio of 79.2% really stands out, far below the industry average of 88.3%.
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 97%, 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.
Quite an advantage.
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