Universal Logistics Net Income Plummets 71%, But CEO Still Optimistic
Universal Logistics Holdings Inc. reported net income plunged 71% in the fourth quarter of 2016, although the results were in line with the lower adjusted forecast that the company issued in early February.
The Warren, Michigan, trucking and logistics company earned $2.7 million in profits for the final three months of last year, or 10 cents per share. In the fourth quarter in 2015, the numbers were $9.3 million or 33 cents.
Results in 2016 for the full year were also lackluster. Earnings fell 39% to $24.2 million, or 85 cents. In 2015, the company earned $40 million or $1.37. Revenue dropped 5% to $1.07 billion, including a 9.6% drop in the truckload division.
“We are glad to get 2016 behind us. Our results have been below our expectations and our investors’ expectations for quite some time,” CEO Jeff Rogers said in a conference call with industry analysts. “2016 proved to be very difficult year for Universal, but I am more excited about what’s in front of us than I have ever been since I joined Universal [in 2014].”
In the fourth quarter, revenue companywide dropped 7.7% to $264.1 million, including of a 14% drop in the truckload unit to $153 million. Revenue in the smallest unit, intermodal drayage, dropped 6.5% to $34.6 million, but it rose 7% to $76.5 million in the logistics division.
The number of loads hauled in the truckload division dropped 3.1% in the fourth quarter versus 2015, resulting in lower revenue per load and per loaded mile. Intermodal drayage loads fell 3% year-over-year.
Operating income, or the amount leftover after expenses were deducted from revenues, fell in all three divisions.
But Rogers noted that a turnaround could be underway, as revenue rose 7% in February through the 23rd on a year-over-year basis.
“In our truckload group our volume changed on a year-over-year basis beginning in October when it was down 3.9%. In November it was down 2.9%, and then up in December 5.1% and up again January 5.6%,” he said.
Rogers added that there is “great upside potential” when the heavy industrial and Class 8 truck markets recover. He also expressed confidence in a turnaround under President Donald Trump for his core customers.
“Reduced regulation in the area of miles per gallon and emissions can surely help our largest customer base: automotive and Class 8 trucks. Increased focus on domestic oil and gas production will have significant positive impact on our flatbed and heavy-haul capabilities as we specialize in oil field moves,” he said.
Citi Research analyst Christian Wetherbee gave a mixed opinion on the company in two investors’ notes in February, giving it a neutral rating.
“While we acknowledge that the freight environment for Universal remains challenging, fundamentals are indeed improving, placing a greater emphasis on execution in the coming quarters. Management needs to build back some credibility with investors, as they have missed [earnings per share] estimates in five of the past six quarters,” he wrote in early February.
In an updated Feb. 24 note, he projected earnings per share to remain flat in 2017 on a year-over-year basis. “Our focus draws even more sharply on the execution improvement necessary for an eventual return to annual earnings growth, which appears more likely to occur in 2018 than 2017 at this point,” Wetherbee wrote.
Rogers acknowledged that the first quarter year-over-year comparison would be difficult. But, he also believes the comparisons should get easier in the second and third quarters.
Universal Logistics ranks No. 30 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
