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Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All

From SCDigest's On-Target E-Magazine

Feb. 1, 2011

Logistics News: Q4, All of 2010 Much Better for Truckload Carriers, but Data Show Divergent Performance


Revenues Rise Nicely, but Profits Even More; What is Up with the Money Machine at Heartland Express?


SCDigest Editorial Staff

With a modest economic recovery in 2010 and freight volumes showing definite but also improvement, US truckload carriers turned in strong financial improvement across the board in the fourth quarter and for the full year 2010, but the level of improvement varied widely across the sector.

Fourth quarter and full year 2010 (unaudited) financial results started filtering in last week and are continuing this week, and overall the news is quite good for the carriers and their shareholders, based on an SCDigest analysis of results from eight of the largest publicly trade TL carriers.

As shown in the table below, Q4 was largely a good one for all the carriers, though as with the full year 2010 results this was in part the easy comparisons to the disastrous results that characterized all of 2009, a period that was legitimately called a "freight depression."

SCDigest Says:

In the end though, it all this meant good news for the carrier bottom lines, with profits up in Q4 in the 20-45% range for a number of them..
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Before looking at those results, which should be of interest to shippers in terms both of how individual carriers are performing financially and shedding light on the different strategies of each carrier, it is important to note that each company reports their results somewhat differently.

While the total revenue and net income numbers are standard across all of them, the reporting of "segment revenue" differs markedly. Some, such as like JB Hunt, offer detailed analysis by lines of business such as trucking, dedicated, intermodal, etc., while most others simply lump all non-straight trucking revenue under "logistics" or 3PL revenue, if broken out at all. SCDigest put the non-trucking revenue in whatever category seemed to make the most sense for a given carrier.

Total revenues were up across the board, but with a pretty wide range. JB Hunt led the way on the top end, seeing 16% Q4 growth, while Celadon saw sales growth (including fuel surcharges) of just 4.6%. By point of reference, the American Trucking Associations Freight Index was up .8% in October, down .6% in November, and up 2.2% in December, meaning freight volumes in total were up just a couple of percent for the quarter.

But a slightly different tale emerges when looking at trucking revenues net of fuel surcharges. Here, the numbers in general show much lower growth than overall revenues. That is a reflection of the fact that diesel prices soared in Q4, and that for some carriers (e.g., JB Hunt, Marten) non-trucking revenues are growing much faster than traditional TL services.

In the end though, it all this meant good news for the carrier bottom lines, with profits up in Q4 in the 20-45% range for a number of them. Swift, however, continues to be an outlier, with the country's largest carrier by truckload volume showing a Q4 loss of $48 million dollars, though that was down 86.5% from Q4 2009.


Source: SCDigest Analysis


Full Year Results Also Strong

Results were similar for the full fiscal year 2010, as shown in the graphic below.

The most obvious metric is that total profitability (net income) was up dramatically versus the rise in revenue. That shows how highly leveraged the asset-intensive carrier market is, where pushing revenues above the break-even mark can lead to substantial increases in total profits.

An interesting story continues to be the excellent profitability of Heartland Express, which is saw net income on sales revenue of 11.9% for the quarter and 12.4% for the full year - amazing numbers for the generally low profit trucking industry.


Source: SCDigest Analysis


Below, we offer some highlights of the carrier earnings reports that offer insights into the market as a whole and individual carrier success and strategies.


"Our average revenues per total mile increased 4.2% in fourth quarter 2010 compared to fourth quarter 2009 due to rising contractual pricing, higher spot market rates and a lower average percentage of empty miles. Sequentially from third quarter 2010 to fourth quarter 2010, average revenues per total mile increased slightly, because few customer contracts were eligible for renewal during fourth quarter 2010.


(Transportation Management Article Continued Below)





In the first half of 2011, a significant amount of our business will become eligible for rate increases through contractual renewals or repricing opportunities."

JB Hunt

"Operating income for the current quarter increased to $97.3 million vs. $72.9 million for the fourth quarter 2009.

This increase was primarily due to a 30% increase in Intermodal operating income and positive Truck operating income vs. a loss last year.

JBTrucking revenue for the current quarter increased slightly vs. the same period 2009 despite a 10% reduction in tractors year-over-year. Excluding fuel surcharges, current quarter revenue decreased 2% vs. the same quarter 2009. At the end of the current quarter, our tractor count was 2,588 vs. 2,861 in 2009.

Rate per mile, excluding fuel surcharges, gained 8% over the same period in 2009. Moreover, the average length of haul was 4% longer than a year ago, multiplying the effect of the year-over-year rate change. Rates from consistent shippers improved year-over-year by 5.1% and spot prices gained 9.5%."


Knight Transportation

“In the fourth quarter, our revenue growth was attributed to a 5.0% improvement in average revenue per total mile, adding 153 additional average tractors to the fleet compared to the fourth quarter last year, and 22.2% growth in our brokerage and rail intermodal revenues. In addition to the increase in average revenue per total mile, we also increased our average length of haul 2.0%, year over year, and we improved our non-revenue miles percentage by 5.7%.

“Average revenue per tractor, excluding fuel surcharge, improved 4.0% when compared to the same quarter last year. This increase in asset productivity was attributable to improved pricing and freight selection but offset by a 0.9% decrease in miles per tractor, year over year. Freight volumes in the second half of 2010 have been modest and measurably below the demand experienced in the second quarter of 2010 and the demand levels experienced before the economic recession. We expect the modest volume levels to continue into the first quarter of 2011".


"The Company earned 13 cents per share, up from 5 cents in the December 2009 quarter. Our strategy to focus on profitable freight and eliminate less desirable freight has resulted in an increase in our rate per loaded mile excluding fuel surcharge to $1.477, up 6.6% from the December 2009 quarter, and up marginally from the September 2010 quarter of $1.471.

Our December quarter loaded miles per truck per week have historically declined approximately 4% sequentially from the September quarter. In part related to harsher winter weather, our miles declined approximately 5% from the September quarter. Higher fuel prices also impacted results. Costs were generally in line or below the December 2009 quarter. We believe with a newer fleet, experienced driver base, solid balance sheet and a diversified business mix, we are well positioned to capitalize on the increased regulatory environment that the transportation industry is currently experiencing."


Heartland Express

"Operating revenues continue to trend upward as a result of tighter industry capacity. However, freight volumes are still moderate in this less than robust economy. The Company continues to focus on improving utilization and cost controls as is reflected in our fourth quarter and year-to-date operating ratio and net margin. Industry capacity will continue to be restrained by the

shortage of qualified drivers. Driver recruitment and retention are expected to be impacted by the stringent safety requirements of the CSA enforcement (Compliance Safety Accountability)."



 “Both the brokerage and intermodal components of our logistics segment contributed to improved revenue. Logistics revenue, net of intermodal fuel surcharges, grew by $4.9 million in the fourth quarter of 2010 over the 2009 quarter, and by $12.1 million in 2010 over 2009. The increase in logistics revenue in the fourth quarter of 2010 was driven by a 15.9% increase in our intermodal revenue, a 26.5% increase in our brokerage services and a 12.8% increase in the revenue associated with our 45% interest in MW Logistics, LLC, a third-party provider of logistics services.

“Our expanding regional operations contributed to a 5.9% fourth-quarter increase in our average truckload revenue, net of fuel surcharges, per tractor per week over last year’s fourth quarter, and a 5.2% increase in 2010 over 2009. We have increased our regional operations to 51.8% of our truckload fleet as of December 31, 2010 from 25.9% as of a year earlier.”


What's your reaction to the Q4 and full year 2010 truckload carrier results? Do they match what you are seeing as a shipper? What is special about Heartland Express? Let us know your thoughts at the Feedback button below?


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