Spot Freight Market Gains

By Jonathan S. Reiskin, Associate News Editor

This story appears in the Dec. 10 print edition of Transport Topics.

The spot market for truckload services showed some signs of increased activity last week as executives with a major carrier and a brokers’ load-matching service said the market tightened in October and November, compared with earlier months.
Tonnage reports from American Trucking Associations have been disappointing for more than a year, with year-over-year comparisons in decline for 14 of the 16 months through October (12-3, p. 1).

However, the recent comments from Landstar System and TransCore’s 3sixty Freight Match said the truckload market is adjusting, meaning a few more loads are chasing a few less trucks.
On Dec. 3, Henry Gerkens, Landstar’s chief executive officer, told stock analysts on a conference call that his company, the nation’s fourth-largest truckload carrier, saw a slight pick-up in business in October and even stronger growth in November. While Landstar does have many long-term relationships with shippers, it is also a strong player dealing with sudden extra loads that define the spot market.
“Actual revenue for October of 2007 was approximately 5% greater than October of 2006. Actual revenue for November of 2007 finished almost 10% above the revenue for November of 2006. Increased volume has offset the somewhat weak pricing environment we’ve experienced all year long,” Gerkens said, his remarks transcribed from www.SeekingAlpha.com.

“We also have seen some life in certain accounts that have been weak all year along,” Because of those developments, he told analysts, “I remain very comfortable with the 47 cents to 52 cents diluted earnings per share estimate previously provided.”
TransCore Vice President David Schrader said his company’s load board experienced a jump in activity during the same time period Gerkens mentioned.
“We saw a pretty dramatic change. Yes, year-over-year comparisons are easier now, but our load postings [of shippers seeking trucks] increased by 42% from October last year to this October. For November, the increase was 36%,” Schrader said in an interview.
Schrader said the October figures were peculiar in that not only did load postings increase, but so did trucks seeking freight, moving up by 32% from a year ago. In November, however, the number of trucks looking for work on the former DAT load board decreased by 7% from a year ago, he said.
“October was the first month in all of ’07 when we saw a [year-over-year] improvement, and there was not a slow buildup to this. Instead, it was like turning on a light,” Schrader said from his Beaverton, Ore., office.
Schrader did not call this the start of a freight recovery, admitting it could just be a two-month aberration, but he also said, “It’s quite nice for going into 2008.”
Two stock analysts who follow Landstar had differing views on Gerkens’ presentation. Thom Albrecht of Stephens Inc. called it a “glimmer of hope” and said this means the long fall-off in tonnage “may have found a bottom.” However, Albrecht added in his Dec. 4 note to investors that this should not be confused with a recovery.
“Freight is likely to remain challenging into the first half of 2008. That being said, we believe truck tonnage could bottom by March or April. In the last seven tonnage downturns, the longest was 21 months — and we are now 15 months into a slump that began in August 2006.” Albrecht said this suggests a recovery would begin in the second quarter of next year.
Edward Wolfe told clients of Bear, Stearns & Co. on Dec. 4 that Landstar’s results may not be the result of a widespread change.
“We believe this is indicative of Landstar’s drive to increase the number of its agents, who are directly involved in growing new business lines and taking market share. It may also be indicative of the large, asset-based truckload carriers’ fleet reductions in recent quarters,” Wolfe said.
Meanwhile, Steve O’Kane, president of A. Duie Pyle Cos., a Northeastern regional less-than-truckload carrier that also does some truckload work, said his West Chester, Pa., business is largely standing pat.
“We’ve not seen much of a change. We had a good November, but not a great one. Then again, we didn’t see the year-over-year downturn that some of the other carriers have, but we’re holding along reasonably well,” O’Kane said in an interview.
In general economic news, the Labor Department said Dec. 5 that third-quarter economic productivity increased to an annual rate of 6.3% from 2.2% in the April-to-June quarter. Bloomberg News said economists had been predicting a gain of 5.9%.
The wire service also reported that retail sales in November topped economists’ estimates. Wal-Mart Stores reported a 1.5% gain, and Costco Wholesale Corp. enjoyed a 9% increase, both in terms of stores open at least a year. Bloomberg cited a Retail Metrics survey.
Also, the Commerce Department said factory orders rose by 0.5% in October, higher than expected, while the Institute for Supply Management’s manufacturing index continued to expand in November, although not as much as in October.