Fleets Report Modest Second-Quarter Gains, Say Operating Conditions Remain Difficult

This story appears in the July 22 print edition of Transport Topics.

An initial round of second-quarter trucking earnings from J.B. Hunt Transport Services Inc. and Marten Transport Ltd., showed modestly higher results last week, which may signal a trend for the industry.

Helped by higher intermodal and brokerage unit margins, J.B. Hunt, based in Lowell, Ark., said July 15 that net income rose 9% to $87.7 million, or 73 cents per share, from $80.5 million, or 67 cents. Revenue rose 10% to $1.38 billion.

Marten, meanwhile, increased net income 1% to $7.7 million, or 23 cents per share, from $7.6 million, or 23 cents. Revenue at the Mondovi, Wis.-based company rose 2.8% to $161.4 million.

William Blair analyst Nate Brochmann said in a July 16 report to investors: “Hunt’s results could be indicative of others throughout the reporting season,” particularly in the brokerage and truckload businesses.

Indeed, the first two reports were consistent with the indications from a Transport Topics review of analysts’ estimates that showed truckload fleets as a whole could post earnings just 3% higher in the quarter, when freight demand was described as “mixed.”

Carriers stressed difficult operating conditions.

“We continue to grow and expand our business despite continued slow economic growth and a challenging rate environment,” CEO Randy Marten said in a July 17 statement.

For the first half, net income rose 14% to $14.9 million, or 45 cents, at Marten, which ranks No. 42 among Transport Topics Top 100 For-Hire Carriers in the United States and Canada. Revenue rose 5.7% to $325.9 million.

Marten has improved net income on a year-over-year basis for 13 straight quarters.

The carrier’s results reflected the separation of its MW Logistics LLC from the trucking operation during this year’s first quarter. In the 2012 second quarter, that unit produced revenue of $8.1 million.

Marten’s operating ratio, including fuel surcharges for the truckload and other businesses such as intermodal and logistics, was 91.9, compared with 91.5 in the earlier period.

The company reported better truckload miles per tractor and revenue per tractor, but revenue per mile fell because of changes in freight patterns.

At J.B. Hunt, No. 4 on the for-hire TT Top 100 list, truck-rail continued to be its largest business, with revenue and shipments rising 12%.

Intermodal revenue of $854.7 million accounted for 62% of total sales, and $110.7 million of operating income was responsible for three-fourths of profits.

Operating income fell about 11% at J.B. Hunt’s dedicated unit despite a 13% increase in revenue to $302.6 million because of rising claims and equipment and technology costs.

Though the truck unit’s rates rose 2.1% per mile, revenue fell 20% and profits declined 67% as the fleet size declined and utilization deteriorated.

Among rails, earnings also improved at CSX Corp. and Union Pacific Corp., continuing the industry trend of higher profits through rate increases that outpaced rail freight volumes.

Union Pacific, based in Omaha, Neb., increased net income 10% to $1.1 billion, or $2.37. Its operating ratio was 65.7, nearly one percentage point better than the 2012 period. Revenue rose 5% to $5.47 billion.

Total shipments fell 1%, and intermodal declined 3%. Revenue per intermodal load rose 2%, and total revenue per load climbed 5%.

Jacksonville, Fla.-based CSX earned $535 million, or 52 cents, a 4% year-over-year improvement. Its operating ratio improved slightly to 68.6.

Revenue rose 2% to $3.07 billion, and shipments rose 1%. Intermodal volume was 2% higher, accounting for CSX’s volume increase. Revenue per intermodal load rose 2%.