Major Logistics Firms Post Higher 1Q Profits
This story appears in the May 2 print edition of Transport Topics.
Quarterly earnings reports last week were divided between four logistics operators that reported improved operating results and four truckload fleets whose profits fell due to pressure on rates and minimal freight shipment growth.
Among truckload carriers, Covenant Transport Group’s net income fell 30% to $3.8 million, or 21 cents per share, excluding a gain in the year-ago period. Celadon Group’s fell 39% to $5.2 million, or 19 cents. Heartland Express slipped 18% to $14.4 million, or 17 cents. Patriot Transportation Holding’s net income, excluding a charge in the year-earlier period, fell 6% to $863,000 or 26 cents.
In logistics, C.H. Robinson Worldwide raised net income 12% to $119 million, or 83 cents. Hub Group’s 75% improvement in net income to $18 million, or 51 cents, was the best percentage growth in the period. Also, improved logistics profits raised earnings at Ryder System by 5% to $56.2 million, or $1.05. Echo Global Logistics’ net income, adjusted for costs such as stock compensation, was 30% higher at $7.1 million, or 24 cents.
With supply and demand out of balance, BB&T Capital Markets analyst Thom Albrecht said in a report that “the operating environment remains optimal for freight brokers, but that same environment is pressuring asset-based carriers’ operating metrics and profits.”
Conditions sparked widespread caution and scaled-back expectations.
“It may be several quarters until freight demand increases and trucking capacity subsides to a point where supply and demand are favorably balanced,” Covenant CEO David Parker said.
“In this environment of soft freight and pricing pressure, we are continuing to focus on our customer relationships that can provide us with freight opportunities that will drive better equipment utilization,” Celadon CEO Paul Will said.
Hub and Echo lowered their expectations for 2016 from prior forecasts.
At Covenant, revenue fell 6.5% to $156.3 million, including a fuel surcharge. Revenue per tractor per week fell, as did miles per tractor. A $4.7 million tax benefit helped 2015 results.
Revenue rose 12% at Celadon to $259.6 million in its fiscal third quarter, when acquisitions helped boost the seated truck count by about 20%. Like Covenant, revenue per tractor per week and miles per tractor declined, even though revenue per loaded mile increased.
Heartland revenue fell 13% to $162.8 million. About half of the drop resulted from lower fuel surcharge revenue. Gains from equipment sales plummeted to $1.3 million from $10.1 million. Excluding that decline, profit before interest and taxes rose 4% to $18.9 million.
Patriot’s fiscal second-quarter revenue fell 2% to $29 million. A $1.27 million impairment charge affected 2015 period profits. Unlike others, Patriot said that demand began to increase during the second quarter, leading to optimism that volume will continue to grow in the summer.
On the logistics side, C.H. Robinson raised net revenue, or profit after transport costs are paid, 7.3% to $563.3 million. Profit margin rose 2 percentage points on truckload freight that contributes 60% of profits. Less-than-truckload net revenue climbed 6.9% to $91.3 million, helped by 10% higher volume. Corporate revenue fell 6.9% to $3.07 billion as fuel surcharges declined.
Hub Group’s profit margin rose 20% to $108.4 million. Revenue fell 4% to $805.9 million, also hurt by surcharges. Intermodal volume rose 1%, but revenue dipped 2% to $414 million. (Net income was reduced $4.1 million for severance and terminal closing costs.)
At Echo, revenue rose 43% to $405.3 million, mostly due to spot-market activity. Net revenue rose 52% to $80.8 million, and the net revenue margin improved to 19.9% from 18.8%. (Echo’s net income fell 92% to $300,000, or 1 cent, due to costs such as amortization, depreciation and stock compensation costs.)
Logistics profit rose 26% at Ryder System Inc. Dedicated profit on that basis climbed 59% to $14.3 million. The fleet management business, the largest unit, saw profit before taxes slip 8% to $82.9 million, hurt by weaker utilization and used-truck prices. Companywide, revenue rose 4% to $1.63 billion.
Hub Group is No. 8 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada. Heartland ranks No. 39, Celadon is No. 42 and Covenant is No. 46.
C.H. Robinson is No. 4 on the TT Logistics 50, Ryder is No. 6 and Echo is No. 35.
