LTL Fleets Post Profits for 2016 But Come Up Short of Forecasts
This story appears in the Feb. 13 print edition of Transport Topics.
Recent less-than-truckload earnings reports point to a sector that ended 2016 profitably but at lower levels than the year before.
ArcBest Corp., Old Dominion Freight Line, Saia Inc. and YRC Worldwide all fell below the forecasts from industry analysts.
David Ross, who follows LTLs for Stifel, Nicolaus & Co., said the fourth quarter was “a difficult LTL freight market,” but the sector could benefit this year if the Trump administration and Congress agree on spending issues, especially highway spending.
YRC reported a $7.5 million net loss in the fourth quarter, or 23 cents a share, better than the $23.5 million loss, or 73 cents, in the last three months of 2015 but still short of analysts’ expectations. The forecast predicted a 12-cent loss, according to a Bloomberg News survey. Revenue at the Overland Park, Kansas-based carrier was up 0.5% to $1.15 billion.
YRC cut $29 million in salaries, wages and employee benefits.
“The impact of the economy and freight environment resulted in shipments being down on a year-over-year basis at YRC Freight and the regional carriers,” CEO James Welch said during a conference call.
“With industrial shipments comprising approximately 50% to 60% of our revenue, we would have, obviously, liked to have seen growth in this part of the economy,” he said.
At the longhaul YRC Freight division, which includes the Reimer Canadian unit, revenue dropped 0.5% to $730.3 in the quarter but rose 2.2% to $418 million at the YRC Regional Transportation segment. The volume of shipments per day was relatively flat in the quarter year-over-year at both divisions. Revenue per hundredweight at YRC Freight fell 1.5% and rose 0.3% in the regional segment made up of Holland, New Penn and Reddaway.
Old Dominion of Thomasville, North Carolina, reported $68.5 million in profits, or 83 cents, down 5.1% versus the fourth quarter of 2015 and 2 cents less than the forecasts. Revenue rose 1.5% to $745.7 million.
But it also was unable to overcome a $10 million jump in salaries, wages and benefits, $2 million more for insurance and claims and a $5 million increase in depreciation and amortization.
“The overall fourth-quarter operating environment was similar to what we experienced through 2016. We had a slow start to the quarter, but our revenue and tonnage marginally improved on a year-over-year basis, as the quarter progressed,” Old Dominion Vice Chairman and CEO David Congdon said.
“These trends, combined with the increase in LTL weight per shipment and other improving macroeconomic indicators for the fourth quarter, provided us with a sense of cautious optimism for an improved economy in 2017, which also concurs with economic forecasts or improved GDP,” he said.
The company’s daily revenue increased 3.2%, including a 0.3% increase in LTL tons and a 2.6% increase in revenue per hundredweight. Quarterly operating ratio (a measure of expenses as a percentage of revenue) deteriorated slightly to 84.8 from 84.5.
ArcBest, which is based in Fort Smith, Arkansas, said on Feb. 8 that its revenue rose, year-over-year, both for the quarter and year. So did expenses, but at a higher rate, thereby driving down profits.
The company posted net income of $1.58 million, or 6 cents a share, on revenue of $688.2 million. In contrast, during the last three months of 2015, ArcBest earned $4.99 million, or 19 cents, on revenue of $648.1 million.
Its largest subsidiary is less-than-truckload carrier ABF Freight. The unit “experienced higher average daily revenue resulting from increased revenue per hundredweight, positively impacted by freight profile changes,” the company said.
“In the midst of a competitive but rational industry yield environment, ArcBest’s asset-based pricing remained disciplined,” the company said.
The operating ratio at ABF deteriorated year-over-year to 98.5 from 98.3. For the year, it moved to 98.2 from 96.7.
The company’s other major divisions are asset-light ArcBest, which does expedited, moving and logistics work, and FleetNet America, a third-party provider of maintenance services.
Saia’s net income dropped 9.1% to $10.3 million, or 40 cents, in the quarter — 2 cents below the average forecast, according to Bloomberg News. In the year prior, the company earned $11.4 million, or 45 cents.
Revenue increased 4.4% to $300.2 million, but that couldn’t make up for a $7 million increase in wages and employee benefits, $4 million more in claims and insurance expenses and a $3 million jump in depreciation and amortization.
“[The] depreciation and amortization expense was up 17.2% in the fourth quarter, a reflection of the significant investments we are making in our fleet, real estate and information technology,” Saia CEO Rick O’Dell said.
YRC ranks No. 5 on the Transport Topics Top 100 list of for-hire carriers. Old Dominion is No. 11, ArcBest ranks No. 12 and Saia is No. 25.
