Werner, Hunt, Marten Profits Soar, But USA Truck Reports 2Q Losses

This story appears in the July 23 print edition of Transport Topics.

The first three trucking companies to report second-quarter earnings last week said a combination of lower fuel costs, higher rates and cost controls produced double-digit profit improvements.

J.B. Hunt Transport Services, Lowell, Ark., increased net income 23% to $80.5 million, while Marten Transport profit rose 22% to $7.6 million and Werner Enterprises increased earnings 11% to $30.7 million.

However, the fourth company to report, USA Truck of Van Buren, Ark., went against the trend, losing $3.5 million after a $598,000 profit in the 2011 period.

Recent reports by analysts suggested few signs of freight growth for public and privately held fleets alike, in line with the modest changes in trucking shipments at Hunt, Werner and Marten.

“Demand generally remains sluggish but consistent,” said a July 17 report by Wolfe Trahan & Co.

A July 16 report by Credit Suisse analyst Chris Ceraso said the typical summer dip in demand started earlier this year.

“Carriers and shippers have described the demand environment with adjectives such as ‘blah’ and ‘boring’ as demand remains stable,” Deutsche Bank analyst Justin Yagerman said in a report.

J.B. Hunt — the largest of the reporting companies at No. 5 on the Transport Topics Top 100 For-Hire Carriers in the United States and Canada — said intermodal operating income that excluded taxes and interest rose 22% to $93.4 million. Hunt, which relies on intermodal for 70% of its profit, attributed gains partly to higher revenue and fuel-surcharge collections.

Intermodal revenue was $762 million, or 60% of Hunt’s $1.26 billion total that topped the 2011 period by 9%.

“J.B. Hunt continues to drive strong intermodal load growth (up 12.6% year-over-year in the second quarter) . . . despite a slowing economy, declining diesel prices (which are down 11% from the recent peak in April), and modest import growth,” said a report from Yagerman that noted Hunt’s 21% higher truck/rail loads in the eastern United States.

Ceraso said lower fuel prices and the lag between paying for fuel and collecting the fuel surcharge helped Hunt’s truckload and dedicated contract carriage units to improve profit margins.

Operating income rose 21% to $33.2 million at Hunt’s dedicated unit and 28% at the truckload business to $8.8 million, despite a 3% drop in truckload revenue to $126.2 million and just a 1% increase in dedicated revenue to $267.3 million.

On the other hand, higher owner-operator costs and driver wage costs put pressure on Hunt’s trucking margins, Ceraso’s report said.

Another sign of pricing pressure was lower margins at Hunt’s brokerage unit, where operating income was down 25% to $1.96 million, despite a 23% increase in revenue to $109.5 million.

Werner, Omaha, Neb. — No. 11 on the for-hire TT 100 — increased revenue by $5.9 million, or 1%, to $521.8 million. The company’s value-added-services division, including brokerage and intermodal, raised revenue by $12.8 million to $84.0 million, while trucking revenue fell 2% to $429.4 million.

Trucking operating income improved 9%, helped by an $11.2 million drop in fuel costs. Value-added-services operating income climbed 15%, helped by growth in shipments and rates.

“Second-quarter 2012 freight demand demonstrated typical seasonal trends and improved into June similar to second quarter 2011,” Werner’s statement said, noting that demand is being influenced by capacity limitations as well as by increased customer demand. “Freight demand to date in July 2012 continues to show typical seasonal trends similar to July 2011.”

Werner raised revenue per loaded mile by 3.1%, but miles per tractor declined 3.4%, and total miles operated were 3% lower. Part of the reason for lower miles per tractor included a shortened length of haul and fewer student/driver teams on the road, the statement said.

At Marten, the truckload business raised operating income 14% to $11.0 million, and posted 31.5% higher logistics operating income at $2.3 million.

Profit growth at Marten, Mondovi, Wis. — No. 41 on the for-hire TT 100 — outpaced a modest 4% revenue improvement to $157.0 million.

Part of the reason was a drop of nearly $1 million in fuel costs, coupled with improved efficiency, said a report on Marten by Thom Albrecht, a BB&T Capital Markets analyst.

“Lower net fuel expense is not just from the lagging impact of falling fuel prices and surcharges that come off slower,” his report said. “It also reflects proactive fuel management, including fuel network optimization, managing out-of-route and empty miles [and] reduced idle time.”

USA Truck attributed its quarterly loss to difficulty in finding drivers that left 12% of trucks unseated, economic weakness and inefficient operations. Revenue fell almost 7% to $129.6 million.

“Poor tractor utilization was the main inhibitor to performance,” USA Truck’s July 19 statement said.

USA Truck, No. 49 on the for-hire TT 100, posted a loss despite a $5.8 million decline in fuel costs.