Trucking Industry Stocks Ride Wave of Second-Half Profitability in 2010

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Most trucking stocks joined a rising stock market through the second half of 2010, counteracting a jittery first half, as profits climbed at the majority of publicly traded carriers.

Most companies followed on the Transport Topics Transportation Stocks Table posted price increases relative to the end of 2009. Publicly traded carriers mainly reported higher revenue, freight rates and earnings.

Trucking companies that survived 2009 were able to benefit from modest economic growth and less competition because of the wave of carrier closings that extended into this year.

Major stock indexes — including the Standard & Poor’s 500, the Dow Jones Industrial Average and the Nasdaq Composite — advanced for the first two weeks of the year, tumbled for a month, then rose crisply through April when worries about Greek debt caused a plunge that lasted until just before the Fourth of July.

Since then the big three indexes appreciated by about 20% each into early December (6-28, p. 1), although there was a temporary retreat in August related to news of a sluggish domestic economy.

Three stock indexes for transportation companies — the Dow Jones Transportation Average and the S&P and Dow trucking indexes — all had patterns similar to the broad-based, major stock indexes.

The second-half rise was a siren’s song that pulled several trucking companies toward public markets.

New Century Transportation, Westampton, N.J., and Panther Expedited Services, Seville, Ohio, filed S-1 registrations with the Securities and Exchange Commission in August, saying they would like to go public. Panther is an expedited carrier and New Century describes itself as a less-than-truckload/expedited hybrid.

Swift Transportation Co., Phoenix, the nation’s second-largest truckload carrier and No. 10 overall on the Transport Topics Top 100 list of for-hire carriers in the United States and Canada, also moved to return to the public sector.

Having left the Nasdaq exchange in 2007 to go private, Swift said it would stage a billion-dollar initial public offering before the end of this year to get its shares listed on the New York Stock Exchange. That would make it the second-largest IPO in trucking, behind only the UPS Inc. deal in 1999.

Even before the second-half stock surge, Roadrunner Transportation Systems, Cudahy, Wis., went public May 12, listing on the NYSE. The LTL carrier became the first trucking IPO since 2003, when Overnite Transportation, Quality Distribution and Central Freight offered shares.

There were also some transportation departures from the exchanges. After a brief bidding contest, same-day parcel courier Dynamex Inc. agreed earlier this month to be acquired by Greenbriar Equity Group.

In a similar fashion, logistics provider Livingston International was purchased by the Canada Pension Plan Investment Board and Sterling Partners in January.

The year’s most noteworthy transportation deal took place in February when Warren Buffett’s Berkshire Hathaway investment company spent $35.77 billion in cash and stock to acquire Class I freight railroad Burlington Northern Santa Fe Corp.

In the world of private fleets, soft drink makers the Coca-Cola Co. and PepsiCo Inc. bought back what they once spun off, domestic bottling and distribution operations.

In February PepsiCo acquired Pepsi Americas and Pepsi-Cola Bottling Co. In October Coke completed its acquisition of most of Coca-Cola Enterprises. PepsiCo and Coke rank Nos. 1 and 2, respectively, atop the Transport Topics Private 100 list.

A tightening freight market this year led to rising revenue per load for truckload carriers and higher revenue per hundredweight for their LTL counterparts. The truckload improvement was news during the spring with reports of improvement in spot-market volumes and pricing.

ATA’s truck tonnage index grew, year-over-year, for 11 consecutive months through October.

LTL recovery waited until the second half and was not really clear until third-quarter earnings statements were published.

American Trucking Associations Chief Economist Bob Costello said the truckload sector typically leads the industry into and out of recessions. In addition, the truckload sector lost more capacity through bankruptcy than did less-than-truckload.

Oklahoma-based Arrow Trucking Co. declared bankruptcy and closed in January amid intrafamily acrimony, leaving drivers or their equipment stranded. Financial weakness for other carriers led to their acquisition by survivors.

As for stock splits, LTL carrier Old Dominion Freight Line split its shares 3:2 in August and YRC Worldwide, also LTL, did a 1:25 reverse split in October. Patriot Transportation Holding an-nounced at the start of this month that it planned to split its shares 3:1 in January.

The YRC contraction was in response to a Nasdaq ruling that the carrier’s share price had fallen below the $1 threshold necessary to maintain its listing.