Most Truckload Profits Drop in 4Q as Freight Demand Slows
Truckload fleets that reported fourth-quarter earnings last week largely trailed the year-earlier quarter amid growing weakness in freight markets.
One exception was Swift Transportation Co., whose net income rose 24%, helped by operational improvements throughout the company and improved profits at its dedicated freight unit.
On the downside, Knight Transportation Inc.’s net income declined 11%, Celadon Group Inc. slipped 22%, Heartland Express Inc. tumbled 21% and Covenant Transportation Group Inc. and Marten Transport Ltd. each dropped 2%.
The results largely were in line with — or slightly ahead of — trucking analysts’ lowered expectations for a quarter when a fleet survey by Bloomberg News and Truckstop.com found that 70% experienced weaker demand than the previous three months.
Both Swift and Knight pre-announced their earnings would fall short of initial estimates.
“The contractual market remains in decent shape, and the company has experienced an increase in average miles per tractor thus far in January,” said Nate Brochmann, a William Blair & Co. analyst in a note about Knight’s results. “Importantly, this indicates the operating environment is not falling off a cliff, in our opinion.
Revenue at Swift fell 4.4% to $1.09 billion, where net income was $72.5 million. Excluding fuel surcharges, revenue rose nearly 4% at the company that ranks No. 6 on Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada. Adjusted earnings per share were 53 cents.
The results were “driven by strong operational performance,” said Swift’s quarterly letter to shareholders, which also cited improved driver retention and fuel efficiency, as well as lower costs for workers’ compensation and accidents. Dedicated operating income, excluding interest and taxes, rose about 45% to $27.9 million.
Operating income, which excludes taxes and interest, slipped at the other units. Truckload, the largest unit, had operating income of $75.2 million, down more
than 10%, as revenue fell 7% to $557.2 million. Refrigerated revenue slipped nearly 10%, and operating income dropped about 25% to $3.54 million. Intermodal operating income fell about 60% to $3.05 million as revenue declined 8% to $100.7 million.
Lower interest costs and the absence of a $27.2 million one-time charge during the 2014 quarter boosted Swift’s results.
Knight, No. 31 on the for-hire TT100, announced $29.2 million, or 36 cents, in net income. Revenue fell 8% to $290.7 million, with fuel surcharges included, and fell 2.8% excluding them. The company also reduced its first-quarter forecast by 4 cents with minimal load growth early in 2016, CEO Dave Jackson said.
He outlined “a less robust freight environment” in the quarter, with weaker freight rates due to fewer spot market freight opportunities.
Net income at Celadon, No. 42, was $6.6 million, or 24 cents, for its fiscal second quarter ended Dec. 31. The revenue increase of 24% was related to acquisitions, as revenue per tractor per week was down 12% as a “result of the lackluster freight environment and the significant growth in our seated tractor count,” a company statement said.
Celadon said it seated an additional 1,693 tractors on a year-over-year basis to position the company for future growth.
Covenant saw net income slip 2% to $13.2 million, or 73 cents. Revenue rose less than 1% to $208.5 million, including fuel surcharge collections, and increased 11% excluding them.
CEO David Parker said that “net income for the fourth quarter was essentially the same as last year in a materially softer overall freight environment,” citing factors such as improved rates that were offset by higher staffing costs and weaker prices for used truck trade-ins.
Covenant ranks No. 46 on the for-hire TT100.
Net income fell 21% at Heartland Express, No. 39, to $17 million, or 20 cents. Revenue declined 14% to $174.6 million including fuel surcharges, and 6.2% excluding them. Heartland tied the decline in results to unspecified lower volumes.
At Marten Transport Ltd., which ranks No. 48, net income was 2% lower at $8.8 million, or 26 cents. Revenue was $168.8 million, a drop of 3%. Revenue rose 5%, excluding fuel surcharge. Marten’s profits rose in the dedicated unit where the fleet size nearly doubled.
Intermodal and brokerage results also improved at Marten, but profits in the truckload unit that accounted for about half of earnings before interest and taxes were 36% lower.
Elsewhere, Patriot Transportation Holding Inc.’s net income improved nearly 40% to $1.51 million, or 46 cents, despite a 7% drop-off in revenue to $29.4 million. The company based in Jacksonville, Florida, reported that $1 million of the profit for its fiscal first quarter ended Dec. 31 resulted from a settlement.
