Brokers’ Truckload Profit Margins Reach Three-Year High

This story appears in the Sept. 1 print edition of Transport Topics.

Brokers’ profit margins for truckload freight hit a three- year high during the second quarter as capacity continued to tighten, a new report said.

The Transportation Intermediaries Association’s report, which also measures revenue and shipments, said truckload profit margins, or the amount left over after carriers are paid, reached 14.3% last quarter, up from 13.6% in the second quarter of 2013. Truckload brokerage, accounting for 71% of surveyed members’ loads, also showed in a 12% rise in invoiced prices to shippers and 11% higher rates paid to carriers. Total shipments climbed 6.6%.

“This is an indication the market is adjusting to secure the capacity available to move the freight,” said Mark Christos, a vice president at Matson Integrated Logistics who compiled the survey for TIA.

“If we look back into 2012 and throughout much of 2013, there was steady margin percentage decline [for truckload],” he told Transport Topics on Aug. 26.

Since the start of 2013 until the second quarter of this year, margins fell in four of five quarters, affected by fluctuating shipment levels.

TIA said the April-to-June period was “an all-around positive quarter” for less-than-truckload and intermodal freight, as well as truckload.

Brokered LTL freight improved, with 18.2% more shipments handled, and 0.2 percentage point higher margins. That freight represents one in 10 shipments managed by brokers surveyed in the report, which includes data from 39 companies.

Intermodal shipments, representing one in 6 of loads in the survey, improved 4.3%. However, margins declined to 9% from 10.2%.

“Rail service has been difficult and it is possible 3PLs are compensating for that to retain customers, but there is not solid proof unless we polled the participants for their opinions,” Christos said.

While truckload margins and freight volumes are improving, profit margins over the past six quarters have followed different paths for LTL and intermodal.

LTL shipments have risen at a steady rate of about 15%, the report showed, and margins have been about 18% in all but one quarter.

The growth pace for intermodal shipments handled by brokers has slowed from the 15% range early last year, and margins have narrowed over that period.

Christos cautioned the report doesn’t include precise measurements of how tight the market is, such as load-to-truck ratios. Those ratios, measured by load-board operators, show how many trucks are being sought by brokers or shippers and those made available by carriers.

Indications of margin improvement also were seen in second-quarter earnings reports from C.H. Robinson Worldwide, Echo Global Logistics and XPO Logistics. None of those companies’ data are included in the report.

Robinson, the largest broker, improved margins by 60 basis points, or 0.6 percentage point, on all types of freight.

Truckload profit margins at Robinson improved 16%, and revenue after carriers were paid reached $305.6 million, accounting for about 70% of companywide profits. That result also included 3% more freight, 10% higher rates charged to shippers and 9% higher amounts paid to carriers.

XPO’s brokerage margins improved, partly reflecting its acquisitions.

Echo raised truckload revenue by 57%, including 36% more freight, and 16% higher revenue per load.

“3PLs continued to grow, expand, and change their businesses,” said TIA President Robert Voltmann in a statement.

TIA’s report also showed progress over the first quarter.

Shipments rose in all modes, with a total 7.9% increase, on that basis to a total of 1.53 million, and revenue increased 13% sequentially to $2.95 billion.

Shipment growth in the second quarter compared with the first quarter was strongest among truckload carriers at 9.3%, followed by 6% for less-than-truckload and 5.6% for intermodal.

Sequentially, margins improved from 13.5% for truckload, remained at 9% for intermodal and increased from 17.8% for LTL.