Initial 2Q Reports Show Profit Gains as Freight Volumes and Pricing Rebound

This story appears in the July 19 print edition of Transport Topics.

Carrier earnings for the second quarter started off on a positive note last week, with truckload carrier Landstar System Inc. reporting a 37% increase in net income and J.B. Hunt Transport Services Inc. announcing a 52% rise in profit.

The tone was consistent with forecasts that industry earnings would improve for virtually every motor carrier, and it was reinforced by improved profitability at YRC Worldwide Inc. that topped analysts’ expectations (see story, p. 20).

Freight forwarder Expeditors International of Washington Inc. also said profit would top forecasts, and third-largest U.S. railroad CSX Corp. said its profit rose 36% from the 2009 second quarter.

The net income at Landstar, Jacksonville, Fla., rose to $24.4 million, or 49 cents a share, from $17.9 million, or 35 cents a share, as loads moved by truck reached the highest quarterly total in the company’s history.

At J.B. Hunt, Lowell, Ark., net income increased to $52.1 million, or 40 cents a share, from $34.3 million, or 23 cents a share.

“Tightening capacity and rising freight rates throughout the second quarter have positive implications for the broader truckload group,” Jon Langenfeld, analyst for Robert W. Baird & Co., said in an investor note. “These conditions support our belief that a truckload capacity crisis is looming (assuming continued reasonable economic growth), supporting further truckload rate increases.”

Landstar said its agent and brokerage volume reached 382,000 loads, a 21% increase from the prior year. Revenue climbed 31% to $641.7 million.

Revenue per load rose 9% and increased in each month during the second quarter, Landstar said.

“The overall freight environment remains strong,” said Landstar Chief Executive Officer Henry Gerkens. “Recent trends in June, and thus far in July, indicate that both revenue per load and the number of loads hauled remain strong compared to the corresponding prior-year quarter. I expect those trends to continue throughout the third quarter.”

Gerkens linked Landstar’s results to market-share gains and said he expected consistent volume growth above 10% later in the year.

Landstar’s operating ratio improved slightly, to 93.8 from 93.9, as operating income rose to $40 million from $29.8 million.

Average revenue per load for the trucking business rose to $1,550 from $1,432, an improvement of 8.2%.

Rail intermodal, air and ocean cargo also rose, reflecting higher rates.

Landstar also said profit for the third quarter would range between 47 cents and 52 cents a share, topping the 39 cents a share recorded in the third quarter last year.

Elsewhere, J.B. Hunt’s revenue climbed to $942.8 million from $770 million. The increase was fueled by 24% growth in intermodal revenue, which accounts for the majority of J.B. Hunt’s revenue and profit.

CSX also cited a positive role for intermodal, which posted an 18% volume increase to 538,000 shipments and a 7% boost in revenue to $304 million.

CSX was able to raise revenue per shipment for all freight by 8%. Intermodal revenue per shipment declined because of a recalculation in the division of revenue for shipments handled by CSX in conjunction with Union Pacific Railroad.

On July 13, Expeditors International of Washington projected profit of 38 cents to 40 cents a share, as much as 60% above the prior-year results of 25 cents a share and above the Wall Street estimate of 30 cents a share.

“We’ve experienced very significant year-over-year volume increases in both our airfreight and ocean freight business,” said CEO Peter Rose. “Our customers seem to be doing well, as compared with 2009.”