Truckload Firms Report Higher Profits, Aided by Asset Sales, Intermodal Gains

This story appears in the April 22 print edition of Transport Topics.

Three truckload carriers reported improved first-quarter earnings, but with significant help from sources other than traditional trucking operations.

Heartland Express Inc. said it raised net income 19% to $19.7 million because of gains from asset sales, and Marten Transport Inc.’s net income climbed 32% to $7.2 million, helped by logistics and asset sale proceeds.

J.B. Hunt Transport Services Inc. relied on intermodal to produce an 8% improvement in net income to $73.3 million.

The reports, representing the initial batch of quarterly earnings, came from three companies that are among the largest publicly traded carriers. Hunt ranks No. 5 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, while Marten ranks No. 41 and Heartland ranks No. 47.

Asset sales at Heartland pumped $11.2 million into operating income, which excludes taxes and interest. Without those sales, Heartland’s operating income was 3% lower at $19 million.

In an investor note about Heartland, BB&T Capital Markets analyst Thom Albrecht characterized the results as “stronger than the real freight world.”

Heartland’s April 16 announcement noted the negative effects from a harsher winter, consistent with privately owned fleets who spoke with TT earlier this month.

While the first round of truck industry earnings gave little sign of a fast-growing freight market, a report from Raymond James analyst Art Hatfield said the results were “decent,” considering low expectations about profit performance in the first three months of 2012.

One bright spot was truck/rail cargo at Hunt, which rose 13% in the quarter to 367,766, or more than 10% of all intermodal rail freight shipments.

Hunt’s intermodal operating profit of $96.8 million was responsible for 77% of the company’s total. Combined profit from the dedicated, truckload and brokerage businesses fell about 25%, in large part because of higher operating costs.

In its earnings commentary, Hunt said its dedicated expenses were inflated by higher costs to hire drivers and office workers to support new business, as well as increased equipment and maintenance costs.

Dedicated operating income at Hunt fell 22% to $21.9 million. Rising driver-related costs hurt the company’s truckload unit even more, reducing operating income by 78%.

Hunt’s continuing shift away from one-way truckload business also was a factor as that fleet was reduced 27% to 2,011 tractors. The one-way truckload fleet is half the size it was five years ago.

Randy Marten, CEO of the family company, attributed the improved results to “continued strategic focus on consumer solutions, cost-effectiveness and improvements in equipment utilization.”

At Marten, asset sales rose to $2.4 million from $1.5 million, and logistics profit before taxes and interest rose 6% to $2.5 million.

Unlike the other two carriers, Marten’s truckload results did improve, with operating income climbing to $10 million, or 40%, reflecting improved equipment utilization.

Other than Hunt’s intermodal business, revenue growth generally was muted.

Excluding its 15% intermodal revenue increase, revenue at Hunt increased just 4%. Revenue for the Lowell, Ark., company increased 11% to $1.29 billion.

Revenue at Marten, Mondovi, Wis., climbed 9% to $164.5 million, with more than half of the increase from intermodal or third-party logistics. Freight rates on a per-mile basis, excluding fuel surcharge, fell 0.5%.

Heartland, N. Liberty, Iowa, said revenue dipped less than 1% to $134.3 million. Heartland doesn’t release shipment or rate information.