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- Dec. 2, 2015 -


Supply Chain Graphic of the Week: Q3 2015 US Carrier Operating Performance by Mode


All Three Modes Saw Flattish Results, While Union Pacific, Knight Transportation, and Old Dominion Continue to Put Up Impressive Numbers


By SCDigest Editorial Staff



We just finished our Q2 2015 review of truckload, rail and LTL carrier results and trends (see US Truckload Carriers Enjoy Generally Strong Q3, Finally Starting to Add Capacity, Rail Carriers See Volumes Drop in Q3, but Rates, Profits Again Stay Strong, and US LTL Carriers have Mixed Results in Q3, but Old Dominion Powers On.)

All told, results in terms of profits were middling for carriers across the three modes of rail, truckload, and less-than-truckload we follow. Revenues took a hit given much lower fuel surcharge revenues year-over-year, somewhat impacting the bottom line.


So we'll take this occasion to once again present some interesting comparisons on operating metrics across each of these three modes for the quarter, as shown in the table below. Note that net income is based usually on each carrier's total business, which may include other businesses, such as the large and generally fast growing intermodal segment at truckload carrier JB Hunt (though it uncharacteristically saw a small decline in Q3).


However, almost always we are able to find or calculate the operating ratio for the specific business segment at hand (truckload, LTL, etc.) at each carrier, which is the data used in the table below. The operating ratio, or operating expense divided by operating revenue, is a key metric in the transport sector.



Q3 2015 US Operating Metrics by Mode
  Truckload Sector Rail Sector LTL Sector
Average Net Income as a Percent of Revenue Q3 6.3%% 20.8% 4.0%
Best Net Income as a Percent of Sales Q3 10.1% 22.2% 10.8%
Knight Transportation Union Pacific Old Dominion
Average Operating Ratio Q3 2015 86.7% 65.9% 93.1%
Average Operating Ratio Q3 2014 88.2% 66.3% 92.9%
Best Operating Ratio Q3 79.8% 60.3% 82.1%
Knight Transportation Union Pacific Old Dominion
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 more about 20 percentage points better than for truckload carriers and more than 27 percentage points better than the LTL sector - amazing. The gap in both cases grew in Q3 versus Q2.


As can be seen, average operating ratios, based on the select groups of public carriers we follow, were down a solid 1.5 percentage points in Q3 versus 2015 for truckload carriers, down just a bit for rail carriers, and up just a couple of ticks in LTL.


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.


Net income as a percent of sales is weighted for each mode, however, based on total revenues and net income for each group.


In the quarter, rail carriers results were again impacted with plunging coal volumes, but also in Q3 by a decline in overall carloads. But profit margins stayed strong. Once again one has to be impressed with the continued performance of Union Pacific. Its net income of 22.2% of revenue compares favorably with companies in almost any sector. By comparison, profit as a percent of revenue was just 5% at Ford in Q3, and about 15% at Procter & Gamble.


The average for the group of four rail carriers was a robust 20.8% of sales. Apparently, railroads are where you make the money these days.


In the truckload sector, Knight Transportation's operating ratio of 79.8% really stands out, far below the sector average of 86.7%.


In addition, the results from Old Dominion continue to impress, as it continues to far outperform the rest of the LTL market. It came in with an operating ratio 11 percentage points better than the LTL sector average and 4.6 percentage points better than the truckload sector average.


If you take Old Dominion out of the calculation, its LTL competitors had an average OR of 95.8%, meaning Old Dominion was more than 13 percentage points better. That in turn means that for every $1 million in revenue, OD drops an extra $130,000 or so to the bottom line than do its LTL competitors on average.


Quite an advantage.


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