Truckload Earnings Expected to Be Mixed for Third Quarter, but Brighter Times Are Ahead, Insiders Say
Wall Street analysts expect truckload carriers to report mixed third-quarter earnings, despite a boost in business related to hurricanes Harvey and Irma.
Six of the 16 publicly traded truckload carriers are expected to see 3Q profit growth, while three could have diminished returns, according to a Bloomberg News consensus analyst forecast. USA Truck is forecast to lose money for the seventh consecutive quarter, but will likely climb closer to the break-even mark than during any point of 2016.
Celadon Group and Roadrunner Transportation Systems won’t report earnings, due to ongoing audits into financial discrepancies. Schneider and Daseke Inc. don’t have year-over-year comparisons available because they began trading on the New York Stock Exchange earlier this year. Patriot Transportation and PAM Transport Services have no industry analysts covering them.
Werner Enterprises, which ranks No. 16 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, is expected to have their second consecutive strong quarter. After growing profits 27% year over year in the second quarter, forecasts call for a 14% rise to $21.6 million in the third quarter. Earnings per share could rise a nickel year over year to 31 cents.
Conversely, the newly created Knight-Swift Transportation Holdings — the companies closed their merger on Sept. 8 — could announce that profits in the third quarter fell about 10% to $34.5 million or 33 cents, the analysts predict. The year-over-year comparison would be evaluated against the combined profits of the two companies one year ago. Swift and Knight rank Nos. 7 and 30, respectively, on the for-hire TT100.
John Larkin, analyst at Stifel, Nicolaus and Co., noted that spot markets are up 15% and contract rates in the second half of the year were up 5% to 10% year over year, which will eventually spur earnings growth.
For Epes Carriers Inc., revenue and operating income rose low-to-mid single digits versus last year, according to the company, based on data through August. The Greensboro, N.C., dry-van carrier ranks No. 81 on the for-hire TT100.
“The past quarter has been very robust. We find ourselves in most areas most every day. And since the hurricanes, which was unfortunate for the country, things have picked up even more. We’re at a point where we’re extremely busy right now,” said Scott Fulton, Epes senior vice president of sales.
Big G Express president Randy Vernon said it’s been the busiest he’s seen conditions since late 2014. Vernon is re-approaching shippers for rate increases because he believes pricing hasn’t bounced back to 2015 levels, even after the latest capacity crunch.
“It’s better to be us now than it was 12 months ago. There isn’t any capacity right now and I don’t see it changing in the next two to three quarters,” he said. “A year ago, we were relying on brokers for about 6% to 7% of our business, whereas now broker business is probably about 0.1% or 0.2% in the last 60 days.”
For Nussbaum Transportation, a dry-van carrier in Hudson, Ill., volume and revenue were up about 14%, which founder and CEO Brent Nussbaum credits to the strong economy.
“Demand is up significantly from last year. Freight rates are up. Every industry we work with is up. This appears to be a result of housing, commercial construction, mining of commodities, business investment and consumer confidence [all] going up,” he said.
Flatbed carriers in particular have capitalized on increased residential and commercial construction in 2017. The Institute for Supply Management manufacturing index climbed in July, August and September to 56.3, 58.8 and 60.8, respectively. During the same period last year, the numbers were 52.3, 49.4 and 51.7. A total above 50 is expansion and below 50 is contraction.
Melton Truck Lines, based in Tulsa, Okla., reaped the rewards as revenue per truck per week rose 4.8% in the quarter.
“If you put our freight levels graph on the same chart as the ISM, the two are highly correlated. So last month when the ISM was over 60 — smoking hot — conditions are very, very strong for us. The entire year as a whole has been very robust,” Chief Financial Officer Robert Ragan said. “Our conditions, in some ways, are tied to how steel is doing and the steel industry is much healthier than it was a few years ago.”
Business has not been as favorable in the refrigerated truckload market in 2017.
Twin Falls, Idaho-based Giltner Inc., and Los Angeles-based White Arrow summarized the third quarter as flat. White Arrow CEO Chris Ceausu said per-mile rates were about the same as a year ago, while Giltner General Manager Mark Durfee described the last three months as marginal.
“Capacity was well-matched to the volume until about the last three weeks of the quarter when things got very tight. Everyone we talk to wants us to give them trucks, but we’re completely booked up and all of our trucks are manned with drivers,” Durfee said. “But when you put all three months together, it was break-even at best. We’re looking forward to the fourth quarter as hopefully good for us, given the recent capacity crunch.”
