Fleets’ Profits Show Signs of Improvement

This story appears in the Oct. 29 print edition of Transport Topics.

Trucking profits showed signs of improvement last week, as reports of growing earnings came from the truckload and less-than-truckload sectors, as well as brokerage and leasing.

Celadon Group led truckload fleets, raising earnings 51% to $8.3 million in its fiscal first quarter ended Sept. 30, helped by higher revenue per mile, lower fuel costs for an updated fleet and a larger driver corps to handle more freight. Truckload firm Landstar System increased net income 9.8% to $33.1 million, and Knight Transportation’s net income rose less than 1% to $16.6 million.

“The third quarter of 2012 proved to be more challenging than expected, due primarily to 11 consecutive weeks of escalating fuel prices and a slowing economy that yielded seasonally weak freight demand,” Knight Transportation CEO Kevin Knight said.

“Given the challenging environment, we are generally pleased with the efforts in our asset-based businesses,” Knight said, noting an operating ratio of 82.7 in the dry van business.

Elsewhere, Swift Transportation said its net income fell 10% to $27.5 million, hurt by the weak economy, while P.A.M. Transportation reversed a year-earlier loss, earning $881,000.

In the first week of the earnings cycle, truckload profits generally were weaker as carriers cited weak demand and higher expenses (10-22, p. 3).

Less-than-truckload operator Old Dominion Freight Line, owner of the sector’s best profit margins, raised net income 32% to $51 million. Losses widened to $10.1 million at Vitran, which is overhauling its LTL network to restore profitability.

Net income rose at third-party operators C.H. Robinson Worldwide and Hub Group. Robinson’s net income rose 1.7% to $116.3 million, and Hub Group climbed 14% to $18.5 million, despite continued pressure on gross margins derived from the difference between revenue and purchased transport costs.

However, Pacer International’s net income fell 83% to $1.1 million compared with the 2011 quarter.

On the leasing side, Ryder System cited 15% improved net income from continuing operations to $75.1 million.

“This was driven by improving contractual revenue growth, strong used vehicle sales results, and also supported by the prompt cost and rental fleet size adjustments,” CEO Gregory Swienton said in a statement. Full-service leasing, its largest business, grew in the quarter.

In general, revenue growth was modest.

Celadon’s revenue climbed 6.5% to $153.3 million. Landstar’s sales rose 5% to $717.2 million, while Knight boosted revenue 4.8% to $227.9 million and P.A.M. rose 6.3% to $94.5 million. Swift increased revenue less than 1% to $871.1 million,

Revenue grew about 7% at both Hub Group and C.H. Robinson, and 10% at Old Dominion to $544.5 million. Vitran’s revenue rose less than 1% to $206.2 million.

Ryder achieved its earnings increase despite revenue that held steady at $1.57 billion.

Ryder raised its profit forecast for the year by about 5% to nearly $4 a share, though Swienton described “a period of economic softness and uncertainty” that others in trucking also cited in earnings reports.

On the other hand, Swift backed off from its earlier profit target of more than $130 million, or a 20% improvement. The company still expects to post about a 14% year-over-year profit improvement despite third-quarter economic sluggishness.

Swift and other carriers noted the uneven nature of demand during the quarter, a factor that also hit C.H. Robinson, where profit margin improved to 15.5% from the second quarter but trailed last year’s performance.

Robinson, whose quarterly brokerage revenue is larger than any individual truckload fleet, raised volume in that sector 8% but paid out 1% more to carriers than the year earlier.

“Transportation net margins and volumes had a wild quarter,” said a report from BB&T Capital Markets analyst Thom Albrecht. “The volatile gross margin pressure this year is primarily about the vacillating supply and demand; overall demand that is consistently inconsistent.”