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Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All
 

From SCDigest's On-Target E-Magazine

- May 15, 2013 -

 

Logistics News: Q1 2013 Truckload Carrier Review

 

Profits Generally Soar on Modest Volume Growth; Evolution at JB Hunt Continues On


SCDigest Editorial Staff

 

We're back as usual every quarter with our review of the results and comments from leading public truckload carriers, as the last of them finished up their earnings reports in the last two weeks.

SCDigest Says:

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Profits for the group overall were strong, with net income up 20% in the quarter, or almost four times the level of revenue growth.
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After this week's exclusive review of the truckload sector, next week we will present similar data and analysis for less-than-truckload carriers and the four major public rail carriers.

For three of the four quarters we provide results for both the just closed quarter as well as year-to-date numbers, but as nearly all carriers operate on a calendar year basis, after Q1 the quarter and year-to-date are obviously the same, so the latter is unneeded.

The story in Q1 from SCDigest's vantage was profitability. In general, carriers saw profits soar versus load and revenue growth. In total, the ATA's Truck Tonnage Index was up 3.9% versus 2012 at the end of Q1, though the Cass Freight Index has been showing slower growth that that.

Regardless, as TL carriers continue to maintain strong asset discipline, with that trend in some cases reinforced by trouble hiring drivers, the net result is that total capacity in the sector is growing slowly as best, allowing the carriers some pricing power and the change to optimize their networks and customer bases.

All told, carrier revenues for the quarter were up 5.5% in Q1 versus last year, as shown in the table below. But that includes fuel service revenue, and as best we can calculate diesel costs and surcharge revenues per mile should have been about flat year over year. Average on-the-road diesel prices were about $4.02 in Q1, versus $3.97 in Q1 2012, or up about 1%.

Confounding any analysis is the way carriers handle revenue and profits by segment. Different carriers handle reporting for intermodal, dedicated, 3PL, brokerage and other such non-core truckload carriage differently, so a true apples-to-apples comparison across carriers is often not possible. There is also a great deal of difference in the percent of business different carriers have in those segments. In general, carriers listed in the table with NA (not applicable) in a segment revenue row do not have much if any business in that area, or have combined that revenue into a single non-core trucking category. Conversely, carriers such as JB Hunt or Swift Transportation provide detailed numbers by segment.

So there is no question what is happening at JB Hunt, as the core trucking business that of course started the company and led it to the top of the industry is becoming almost an afterthought.

 

Q1 2013 Truckload Sector Results

 

 

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Revenue in the segment for Hunt fell another 20.5% in the quarter, down to about $101 million, or just 8% of total operating revenue, down from 11% in Q1 2012, as this number continues to fall. The operating ratio in the trucking segment was just 99%, meaning the segment operated just barely above breakeven, and the segment's meager profits represented just 1% of total operating profits, as the segment continues to shed trucks as well.

Trucking-only revenue in fact fell just under 1% in the quarter across the whole group, whereas total revenues (including fuel surcharge) were up as noted above 5.5%. This indicates a combination of a focus on non-core trucking by Hunt, Werner, and Swift, and some modest pricing power/rate increases in the quarter across the group.

Profits for the group overall were strong, with net income up 20% in the quarter, or almost four times the level of revenue growth.

Swift, Knight, Marten and Heartland saw profits up 277%, 44.8%, 32.2%, and 19% respectively in Q1 over 2012.

The average unweighted operating ratio across the group fell .4 percentage points to 89.4%, though Heartland again blew away the field, with an OR of just 77.5% in Q1, a decline of about 5 percentage points. That is impressive.

Several carriers warned that if the Federal Appeals Court does not throw out the new Hours of Service rules schedule now to go into effect July 1, productivity in the industry will be lost, and shippers need to understand the potential impact.

"If these rules are adopted, and our customers are unable to provide more flexibility in terms of pickup and delivery times, it will have a negative effect on productivity and available capacity," Knight noted in its earnings release. "We have and will continue to work closely with our customers to help them understand the practical impacts of these changes to driver available hours, and to understand how driver available hours constrains capacity and affects the cost of our services."



(Transportation Management Article Continued Below)

 
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Below are some of the more interesting comments coming from the carriers at the end of Q1, though we will note the depth and breadth of such commentary varies dramatically across the group, which was led as usual by Werner, which continues to provide the most detailed commentary.

Werner

After seeing relatively flat and normal demand in Q1, the carrier was experiencing softer freight demand trends in April compared to the same period in April 2012.

Werner said it believes "there are several truckload capacity constraints including an older industry truck fleet, the higher cost of new trucks and trailers, significant safety regulatory changes and a challenging driver market. We continue to work jointly with our customers to secure sustainable transportation solutions across all modes and to offset increased rates through enhanced optimization and transportation solutions whenever possible."

Overall truck count was down 60 in the quarter to 7090, while the company shifted 200 trucks from One-Way Truckload to Dedicated due to new business awards.

It added that "Assuming the [HOS] rules are adopted without change, we currently believe the new rules will result in a decrease in truck productivity and could tighten up supply relative to demand in the freight market."

JB Hunt

Hunt saw load growth grow by double digits yet again in its intermodal segment, up 13% in Q1. It saw load growth of 47% in its integrated capacity solutions segment. All told, intermodal segment revenues were up 15%, and now accounts for 62% of company revenues and generates 77% of total profits.

The 20% decline in its trucking business was blamed on a 21% decrease in the segments truck count. Effective rates in the segment were up just .5% in the quarter.

Heartland

Company said that during the past eight quarters, including the first quarter of 2013, fuel expense has exceeded salaries, wages, and benefits as its largest expense six times. Historically, prior to significant fuel price increases in 2008, salaries, wages, and benefits was the largest expense.

The average age of the company's tractor fleet was 2.1 years at the end of Q1 compared to 1.9 in 2012. The company took delivery of 485 new trucks during the first quarter, which included ProStar Plus International and Freightliner Cascadia models. An additional 190 new trucks will be received throughout the second quarter of 2013 to complete this current upgrade cycle.

Knight

Company increased its revenue in Q1 for the 14th straight quarter.

Knight does not breakout its "non-asset based revenue," but whatever it is it was up 58% in Q1.

The company said its average tractor count for the quarter increased year-over-year 2.5% to 4,076 tractors, and declined 2.4% from the fourth quarter of 2012. Says its tractor fleet remains one of the most modern fleets in the industry with an average age of 2.0 years

Swift

Average operational truck count fell to 10,785 from 11,037 in Q1 2012 and 12,153 in Q1 2011.

Company said it fired a few customers in its dedicated business through "termination of a few underperforming customer contracts during the latter half of 2012 and the first quarter of 2013."

While Swift's intermodal business is growing the top line, up 11% in the quarter, the segment is losing money, with an OR of 103% in Q1.

Celadon

Company said it was disappointed in the decrease in the average seated line-haul tractors of 227, or 8%, to 2,624 in the quarter versus 2,851 in 2012. It said that to address this shortfall, "we have expanded recruiting efforts at terminal locations, as well as established a driving school and training program at our Indianapolis headquarters. These actions have already produced positive results as our seated count has increased by over 70 since March 31, 2013."



Any reaction to our Q1 2013 truckload segment review? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.

 


   
 

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