Earnings Improve for 7 of 8 Publicly Traded Carriers

This story appears in the July 26 print edition of Transport Topics.

Seven of the eight publicly traded motor carriers that reported second-quarter earnings last week reinforced the trend of improved financial results driven by tight capacity, along with modest rate, volume and utilization improvements.

Werner Enterprises’ earnings rose 65% from a year ago to $20.9 million, Knight Transportation boosted net income 26% to $15.8 million, and Marten Transport rose 15% to $5.2 million.

Arkansas Best Corp. said it cut its net loss by more than half.

Less-than-truckload carrier Vitran and truckload fleet Covenant Transportation Group delivered the most dramatic improvements. Vitran’s profit more than tripled to $1.7 million, while Covenant and USA Truck reversed losses in the 2009 second quarter. Covenant earned $2.9 million and USA Truck’s net income was $900,000.

“The fundamentals of the truckload market remained favorable for pricing as demand continued to strengthen and capacity remained very tight,” said Dahlman Rose analyst Jason Seidl.

The only company to report lower profits was Heartland Express, where net income fell 5.5% to $16.7 million.

“More of the improvement in the freight market over the last six months can be attributed to a decreasing supply of truck capacity rather than rising demand,” Werner said in a July 21 statement. “However, both factors are helping the freight market.”

Werner’s revenue rose 15% to $463.5 million, pushing earnings per share to 29 cents from 18 cents and improving its operating ratio to 92.3 from 94.5. Miles per tractor rose 3.5% and revenue per loaded mile rose 0.5%.

At Knight, revenue per tractor rose 8% and higher rates boosted revenue per loaded mile by 2.3%. Knight’s revenue increased 14% to $185.4 million, while earnings per share increased to 19 cents from 15 cents.

Knight’s operating ratio improved to 86 from 87.2.

“Many of the truckload markets we served experienced capacity constraints,” Kevin Knight, CEO of Knight Transportation, said in a statement.

Although Marten Transport’s revenue rose less than 1% to $125.9 million, revenue per tractor, per week jumped 4.7%. Earnings per share at Marten rose to 23 cents from 20 cents.

Improved use of assets helped Marten, whose operating ratio improved to 92.7 from 94.

At Covenant, revenue rose 17% to $169 million and operating ratio improved to 94.1 from 100.4. Covenant’s results showed a 3.2% rise in revenue per mile and 11% growth in revenue per tractor, leading to the company’s first profit since the fourth quarter of 2007. Net income was 20 cents a share, compared with a loss of $3.1 million, or 22 cents, a year earlier.

USA Truck’s revenue climbed 23% to $113.4 million, reflecting an 11% rise in revenue per tractor per week. Its operating ratio was 96.8, 3.9 percentage points better than the year-earlier period. A $700,000 gain on a fuel contract sale helped earnings.

“A favorable and strengthening freight market afforded us the opportunity to capitalize on our improved operations,” said Covenant CEO David Parker.

Stronger business conditions also helped Arkansas Best.

“We have been encouraged by the improved economy so far this year and its resulting impact on our business,” said Judy McReynolds, the LTL’s CEO.

Tonnage increased 12% at Arkansas Best, boosting results at its ABF Freight unit, where the operating ratio improved to 103.3 in the second quarter from 107.8 in the year-earlier period.

Arkansas Best lost $7.3 million, or 30 cents a share — less than half the year-earlier loss of $15.4 million, or 62 cents a share. Revenue improved 13% to $411.3 million.

McReynolds repeatedly used the word “modest” to describe expectations, though she noted a 14% rise in tonnage thus far in July that exceeded typical seasonal patterns.

Among other carriers, only Knight made any forward-looking comments. This was unlike the first quarter, when companies expressed optimism about their prospects.

“We expect to grow our revenues in each business as business conditions continue to improve,” was all Knight said.

At Vitran, a Canadian carrier that reports in U.S. dollars, net income was $400,000 in last year’s second quarter. Earnings per share climbed to 11 cents a share from 3 cents, and revenue rose 13% to $179 million.

Vitran’s LTL business delivered $3.9 million in operating profit as the operating ratio improved to 97.4 from 99.1.

Heartland said its earnings were reduced because of a smaller gain on asset sales as revenue rose 8.9% to $127.4 million. Its operating ratio worsened to 82.7 from 81.4 and earnings per share fell to 18 cents from 19 cents.