Quarterly Earnings Climb as Rates Rise, Fleets Say

This story appears in the July 28 print edition of Transport Topics.

The simultaneous improvement in freight markets and tightening capacity drove higher second-quarter industry earnings at several trucking companies last week.

Five truckload carriers, logistics operator Hub Group Inc. and leasing specialist Ryder System Inc. reported better results in the quarter.

But Werner Enterprises Inc.’s profit fell slightly.

Knight Transportation Inc.’s net income rose 36% to $25.8 million, or 31 cents per share.

Heartland Express Inc. reported second-quarter net income rose 38% to $26.5 million, or 30 cents. Covenant Transportation Group Inc.’s net income doubled to $3.78 million, or 25 cents, helped by fuel cost savings.

Forward Air Corp., based in Greeneville, Tennessee, improved net income 24% to $17.2 million, or 55 cents, helped by increased freight volume.

Omaha, Nebraska-based Werner, which ranks No. 14 on Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, reported second-quarter earnings slipped 0.8% to $25.6 million, or 35 cents.

Likewise, No. 8 Hub Group, based in Oak Brook, Illinois, had a small swing in earnings but in a positive direction, rising 0.4% to $18.7 million, or 51 cents.

Net income at Jacksonville, Florida-based Landstar System Inc., No. 10, rose 18% to $35.9 million, or 80 cents.

Miami-based Ryder’s 21% rise in net income to $75.4 million, or $1.41, was led by a 28% rise in lease and rental profit, excluding tax.

Along with the generally improved earnings, the carriers posted an increase in revenue of around 10% on average except for North Liberty, Iowa-based Heartland’s 69% bump primarily due to increased miles associated with its November acquisition of Gordon Trucking Inc., as well as a $13.9 million gain on equipment sales — 60% above the 2013 quarter.

Noting that demand was “very strong,” Landstar CEO Henry Gerkens said, “The current operating environment will remain very much intact throughout the balance of 2014.”

Encouraged by growth, Landstar, Forward Air, Knight and Ryder raised 2014 profit forecasts.

Fleets’ reports also stressed their concerns about capacity and drivers.

“The trucking industry continues to be challenged with reductions in the availability of qualified drivers,” Heartland said. “The company will continue to look at all of our alternatives to enhance our drivers’ utilization.”

Werner said it restructured its operations to incorporate longer-haul freight so that drivers could get more miles and pay. Its length of haul on average rose 5.7%.

Phoenix-based Knight, No. 31, also increased its length of haul, in a quarter when revenue rose 7.9%, to $264.2 million. Included were a 64% rise in brokerage revenue and a 6% rise in revenue per tractor on the asset side.

Knight is achieving 4% or greater contract rate increases. “Hiring driver associates remains the biggest challenge,” said President David Jackson, who added, “It seems like we can’t hire brokers fast enough.”

BB&T Capital Markets analyst Thom Albrecht said in a report about No. 33 Heartland, “Freight is fantastic right now.” He estimated that the carrier was turning down 1,000 loads a day.

Heartland’s revenue climbed to $226.8 million from $134 million.

Landstar raised revenue 21% to $814.4 million. Business rose faster in the brokerage sector, where revenue per load and shipments both rose 14%. Freight from the agent network climbed 12%, and loads climbed 4%.

Revenue at No. 46 Forward Air also increased 21% to $193.9 million, mostly from airport-to-airport service.

“We had a really great June, probably the best June ever,” said CEO Bruce Campbell. “We are not experiencing a July drop-off.”

Chattanooga, Tennessee-based Covenant, No. 43, had the smallest revenue increase, 0.7% at $173.7 million. Lower fuel costs reflected a 7.8% decline in the average tractor fleet that mostly was offset by 6.8% higher revenue per tractor. Revenue in the non-asset-based service rose 26%.

Werner’s results reflected improved profit at its trucking unit and weaker results due to higher costs at the logistics unit. Revenue climbed 7% to $542.1 million.

“We made good progress working with our customers on sustainable rate increases during second quarter 2014,” Werner’s quarterly report said.

Trucking benefited from improved metrics, helped by Werner’s load planning and operating changes. Revenue per tractor per week rose 4.9%.

Hub also felt the rub of capacity issues. Revenue rose 7% to $893.9 million, but expenses rose nearly as fast, resulting in profit before interest and taxes of $30.9 million, a 0.1% improvement. The company’s Mode unit, which focuses on brokerage, raised profit by 33%, while the Hub unit that includes intermodal, trucking, brokerage and logistics experienced a 5% drop in earnings before interest and taxes.

Ryder increased revenue 5% to $1.68 billion. Ryder’s supply chain unit, at No. 11, had a 7% drop in profitability.