Fleets Report Strong Quarterly Earnings
This story appears in the Oct. 31 print edition of Transport Topics.
Earnings reports and comments about the current quarter from publicly traded freight-related companies are signaling continued industry strength.
Besides reporting higher profits, Ryder System Inc., Landstar System Inc. and Forward Air Corp. all said they expected stronger fourth-quarter results.
They were among the largest percentage gainers in the third quarter, raising earnings by 39% or more. The largest earnings growth was at Saia Inc., whose net income nearly doubled, followed by Old Dominion Freight Line Inc., whose net income climbed 58%.
“Tonnage firmed up very nicely, ending the quarter with system tonnage up 9.5% for the month of September,” said Forward Air CEO Bruce Campbell. He described October volume as “moderately better than normal seasonality” and predicted profit could rise as much as 24% in the quarter.
“We anticipate continued strong performance in commercial rental and used vehicle sales, solid volumes in our supply chain business and organic expansion in lease fleet levels,” said Gregory Swienton, CEO at Ryder, whose earnings forecast was raised by as much as 15%.
Among the 12 fleets reporting before Transport Topics went to press, only USA Truck Inc., which reported a loss, and Heartland Express Inc., whose profit dipped 17%, reported earnings below last year’s third quarter.
Overall, freight trends this year appeared to improve modestly, as evidenced by a 0.5% increase in American Trucking Associations’ tonnage index in the third quarter over the second quarter (see story, p. 1).
However, comments from Werner Enterprises Inc. sketched an uneven pattern.
“Freight demand began the quarter in July 2011 with the typical seasonal decline from June,” Werner said. “Freight demand in early August returned to levels comparable to the same period in 2010 and weakened modestly in mid-August following heightened concerns about the economy. In the latter part of August and throughout September, we experienced seasonal strengthening in demand.”
“Supply is a hair short of demand in all of truckload,” said BB&T Capital Markets analyst Kevin Sterling in an Oct. 24 note, allowing carriers to raise rates.
For example, Werner raised revenue per loaded mile 3.7% and Marten Transport Ltd. truckload revenue excluding fuel surcharge rose 13%. Knight Transportation Inc. increased revenue per tractor by 4.6%.
In line with modest growth, fleets also showed little change in freight volumes.
Marten, for example, boosted miles run by about 3%, and Werner lowered miles per tractor by 2%. Landstar also showed that trend, increasing shipments just 1%.
The largest company reporting results was Ryder, whose net income gained nearly 50% to $56.5 million helped by capacity additions and stronger pricing. Revenue climbed 19% to $1.57 billion.
Swift Transportation Co., the largest truckload fleet to report this quarter, reversed a year-earlier loss of $1.02 million to earn $31 million. Revenue gained 13% to $863.8 million.
Landstar earned $30.2 million, up 39%, and boosted revenue 10% to $684.0 million.
“Recent trends in September, and thus far in October, indicate continued strength in revenue per load and load volume,” said Landstar CEO Henry Gerkens.
Growth was powered by flatbed shipments of construction equipment, mining, and energy production, Morgan Keegan analyst Chaz Jones wrote in a note about the segment that accounts for about one-third of Landstar’s volume.
Werner’s profit increased 22% to $29.6 million as revenue rose 11% to $509.6 million.
Knight’s net income inched up by 0.5% to $16.67 million, reflecting a 20% increase in revenue to $227.1 million that was offset by higher fuel and insurance costs.
Among smaller truckload fleets, Marten’s net income climbed 16% to $6.3 million and revenue rose 22% to $156.3 million. Celadon’s Group Inc.’s net income for its fiscal 2012 first quarter climbed 21% to $5.4 million on a 1% revenue increase to $141.5 million.
Forward Air added 45% to net income, reaching $12.9 million, and revenue climbed 12% to $135.7 million.
Heartland’s earnings were $15.4 million, compared with $18.3 million, while revenue rose 4.2% to $132.5 million, and USA Truck, whose revenue rose 10% to $130.1 million, lost $4.3 million after a profit in 2010’s third quarter.
Heartland’s earnings were hurt by limited availability of drivers that lowered equipment utilization and revenue, said analyst Jon Langenfeld of Robert W. Baird, in an investor note.
USA Truck CEO Cliff Beckham said his company was hurt by lower-than-expected freight volume, a shortage of drivers and costs to implement a new computer system.
Celadon and Knight also reported a tight driver supply.
Both Old Dominion and Saia, the only less-than-truckload carriers to report results, also indicated they were helped by higher rates.
Old Dominion’s revenue per 100 pounds of freight rose 14%, helping to push revenue to $494.5 million. Net income was $38.6 million.
Saia’s earnings increased to $4.83 million, a 93% increase. Revenue increased 15% to $268.3 million as rates rose 12%.
“We continue to capitalize on an improved industry environment to take prudent pricing actions,” said CEO Rick O’Dell.
