Universal Logistics Beats Q4 Expectations

(Universal Logistics via Facebook)

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Universal Logistics Holdings beat fourth-quarter expectations despite experiencing a year-over-year decline in revenue and earnings, the company detailed Feb. 15.

The Warren, Mich.-based asset-light transportation and logistics company posted net income of $21.4 million, or 81 cents a diluted share, for the three months ending Dec. 31. That compared with $33.4 million, $1.27, during the same time the previous year. Total operating revenue decreased 14.8% to $390.9 million from $458.7 million.

Universal ranks No. 25 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 42 on the TT Top 100 list of the largest logistics companies.

“Universal’s diverse service offerings continue to differentiate us in the transportation and logistics space, and provide a stable earning space for the organization in a changing trade environment,” Universal CEO Tim Phillips said during a call with investors. “While we await a rebound in the transportation market that has been bumping along the bottom the last few quarters, we are pleased with the continued resiliency and performance of our contract logistics segment.”

Phillips added that being deeply rooted in the customers’ ecosystems has provided the opportunity to inject additional value, consistency and visibility into their supply chains. He noted that this, in turn, provided tremendous opportunities for growth. He added that these people-driven solutions require great talent armed with state-of-the-art technology.

“In 2024, it remains our goal to streamline operations within our transportation segment, focusing on cost reductions, which extend additional value to our customers, while continuing to produce consistent margins that fuel our future growth,” Phillips said. “We continue to see excellent opportunities in the contract logistics space to simplify customers’ logistics complexities while simultaneously showcasing cost savings and reliability.”

Tim Phillips, CEO, immersed in our San Luis Potosi, Mexico facility, where dedication to quality work meets vibrant team spirit!#SanLuisPotosi #Mexico #SupplyChain #Logistics pic.twitter.com/v0DOZlLBQZ — Universal Logistics (@Drive4Universal) January 17, 2024

The Q4 results beat expectations by investment analysts on Wall Street, who had been looking for 71 cents per share and quarterly revenue of $377.3 million, according to Zacks Consensus Estimate.

For the full year, Universal Logistics reported net income of $92.9 million, $3.53, on revenue of $1.66 billion, compared with net income of $168.6 million, $6.37, on revenue of $2.02 billion in 2022.

Trucking revenue in Q4 decreased 15.5% to $75.2 million from $89 million during the same time the previous year. The revenue included $30 million of brokerage services, compared with $36.5 million during the prior. Load volumes declined 3.9%, and average operating revenue per load decreased an additional 8.6%. Income from operations decreased 56.1% to $2.5 million from $5.7 million.

“We continue to be extremely mindful of cost in our transportation businesses while we ride out the remainder of the inventory destocking and other market pressures,” Phillips said. “It is fair to say the opportunity to deeply evaluate cost has uncovered opportunities. That will remain fundamental as we step out of the current environment.”

The company-managed brokerage segment experienced 29.1% revenue decline to $28.1 million from $39.6 million the prior year. Load volumes declined 14.4% in the segment and average operating revenue per load decreased 15.7% on a year-over-year basis. Income from operations dropped 99% to $9,000 from $897,000.

The contract logistics segment saw revenue decrease 2% to $201.3 million from $205.5 million. The company had managed 71 value-added programs by the end of the quarter. Income from operations increased 6.6% to $32.1 million from $30.1 million. The segment includes value-added and dedicated services.

“I’m extremely pleased with our buildout of the contract logistics team with excellent talent that is focused on continuous improvement in labor management as well as blueprinting the technological needs of our customers to advance our accuracy and enhance visibility,” Phillips said. “We continue to stress a customer-centric approach.”

Intermodal segment revenue decreased 30.6% to $85.4 million from $123.1 million. Revenue includes other accessorial charges, such as detention, demurrage and storage, which totaled $8.7 million during the quarter. Load volumes increased 1.8%, but the average operating revenue per load decreased 19.9% on a year-over-year basis. The operating loss for the segment was $900,000, compared with an operating gain of $11.1 million.

“You’ve got half of the business, roughly, being the so-called transactional business,” Stifel Capital Markets analyst Bruce Chan said. “That side of the business is generally being affected by what most of the other freight transportation companies are seeing out there right now, too, which is a still very challenging market.”

Chan noted that the pandemic caused downstream effects, such as plant closures and supply chain bottlenecks. He said that this constrained the ability of Universal’s customers to manufacture vehicles and aerospace products, but he’s seen optimism there will be a turnaround in the back half of the year.

“The other side of the business is the contractual business,” Chan said. “The challenge for Universal has been, over the last few years, we’ve had a pretty unique market — I’d say some unprecedented events that have affected their ability to show the kind of earnings and performance that this business would otherwise show.”