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From SCDigest's On-Target E-Magazine
- May 6, 2013 -
Logistics News: Q1 2014 Truckload Carrier Review
Results are Lackluster, as Growing Demand Thwarted by Bad Weather; A More Serious Tone to Warnings about the Driver Shortage
SCDigest Editorial Staff
We're back as usual every quarter with our review of the results and comments from leading public truckload carriers, as the last of them finished up their Q1 2014 earnings reports in the last two weeks.
SCDigest Says: |
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| Hunt said that in its truckload segment, rates from consistent shippers improved approximately 1% year-over-year, but spot market pricing was up more like 9%. |
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What Do You Say?
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After this week's exclusive review of the truckload sector, next week we will present similar data and analysis for less-than-truckload carriers and the four major public rail carriers.
For three of the four quarters we provide results for both the just closed quarter as well as year-to-date numbers, but as nearly all carriers operate on a calendar year basis, after Q1 the quarter and year-to-date are obviously the same, so the latter is unneeded.
It was frankly a bit of an odd quarter, as the the carriers mostly characterized freight demand as strong, but their own financial performances were mostly lackluster. This was largely attributed to the terrible winter weather in much of the country, which hampered pick ups and deliveries, and also increased expenses in many areas. All seven of the publicly traded truckload carriers we follow cited weather as a major factor in results in Q1.
Virtually every carrier also cited a growing driver shortage as a key issue for the industry and their own fortunes, as most have done for many quarters in a row. But there was an even greater sense of urgency this time.
There is a "a very real driver shortage," noted JB Hunt.
Werner said that it "expects the driver market to become more problematic as the year progresses," citing growing freight demand paired with increasing trucking company failures, increasing federal safety regulations that impact productivity, and a recovering construction sector that will create jobs for drivers.
And it does look like freight volumes are rising. Werner said that "we are seeing a meaningful improvement in our freight demand, which we believe is a longer-term shift in market dynamics."
Don't let SCDigest be the first to tell you: the supply-demand balance is swinging in the carriers' favor, and rates are headed up.
While most carriers are continuing to maintain asset discipline, in large part enforced by a lack of drivers, Heartland and Celadon are taking a different path, making acquisitions specifically to acquire drivers. Heartland acquired Gordon Express in 2013, and Celadon has made several smaller acquisitions.
"Our primary focus over the past year has been to expand our service offerings to our customers and grow our capacity of seated tractors," Celadon's earnings release said. And if capacity is going to continue to tighten, having more trucks will be a sure profit winner.
Below is a table of Q1 results for our group of carriers. The revenue growth numbers overall and at Heartland and Celadon specifically have to be taken in perspective, as they largely reflect the impact of the acquisitions. Note also that despite that large year over year growth, profits at both Heartland and Celadon were down big.
Operating ratios mostly rose in the quarter, with our unweighted average moving from 89.9% in 2013 to 92.4% this year. That was led by a big spike upwards at Heartland, for reasons which are not clear beyond weather. Profit as a percent of operating revenue dropped for the group from 5.8% to just 4% in Q1 2014.
And how much longer will JB Hunt be in the straight truckload business? At the end of the current quarter its tractor count was down yet again, to 1,917 compared to 2,011 in 2013, while it share of overall company revenue also fell to 7% from 8% last year. Perhaps that will bottom out at some point.
Q1 2014 Truckload Sector Results
| For Quarter Ending March 31, 2014 |
Data in $Thousands (meaning Werner's
revenue is $492 million, for example) |
| Carrier |
Werner |
JB Hunt |
Heartland |
Knight |
Swift |
Marten |
Celadon* |
Total Carriers |
| Total Operating Rev Including Fuel |
$492,022 |
$1,406,908 |
$224,481 |
$249,163 |
$1,008,400 |
$159,409 |
$193,228 |
$3,733,611 |
| Change 2013 to 2014 |
-0.2% |
8.9% |
67.2% |
5.8% |
2.7% |
-3.1% |
29.1% |
8.2% |
| Trucking Revenue Net of Fuel Surcharge |
$311,522 |
$92,470 |
$178,600 |
$161,827 |
$441,400 |
$97,530 |
$160,634 |
$1,443,983 |
| Change 2013 to 2014 |
-0.6% |
-9.2% |
68.1% |
2.6% |
0.0% |
2.7% |
24.3% |
7.4% |
| Dedicated,3PL, VAS Revenue |
$85,154 |
$484,672 |
NA |
$43,769 |
$157,100 |
$30,009 |
$14,410 |
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| Change 2013 to 2014 |
3.2% |
20.7% |
NA |
37.2% |
8.5% |
-20.5% |
37.3% |
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| Intermodal Revenue |
Included in VAS |
$835,495 |
NA |
NA |
$72,900 |
Included in VAS |
$10,475 |
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| Change 2013 to 2014 |
NA |
4.9% |
NA |
NA |
11.6% |
NA |
76.6% |
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| Net Income |
$14,339 |
$68,664 |
$14,079 |
$19,064 |
$12,305 |
$5,287 |
$3,482 |
$137,220 |
| Change 2013 to 2014 |
-18.1% |
-6.4% |
-28.7% |
25.6% |
-59.4% |
-26.6% |
-20.5% |
-18.2% |
| Net Income as % of Operating Revenue (Total is Unweighted) |
2.9% |
4.9% |
6.3% |
7.7% |
1.2% |
3.3% |
1.8% |
4.0% |
| Net Income as % of Operating Revenue 2013 (Total is Unweighted) |
3.6% |
5.7% |
14.7% |
6.4% |
3.1% |
4.4% |
2.9% |
5.8% |
| Operating Ratio Truckload |
93.4% |
97.3% |
90.8% |
82.0% |
94.2% |
94.0% |
95.4% |
92.4% |
| Operating Ratio Truckload 2013 |
92.6% |
98.1% |
77.8% |
85.3% |
92.4% |
91.8% |
91.5% |
89.9% |
| *Celadon's segment revenues include fuel surcharges, which are not broken out. |
In the section below, we break out key points made in each carrier's earnings releases, although the detail in these reports varies significantly across each carrier.
(Transportation Management Article Continued Below)
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Werner
Said that Q1 freight demand (as measured by the daily morning ratio of loads to trucks in its One-Way Truckload network) showed the strongest first quarter performance in 10 years.
Average revenues per total mile, net of fuel surcharge, rose 3.1% in first quarter 2014 compared to first quarter 2013. This was due to a combination of increased rates with some existing customers, new customer business, surcharges for capacity creation and much higher transactional spot market rates in the One-Way Truckload fleet.
Said that during the process of negotiating rate increases with many customers during the traditionally substantial spring bid season that "Market responsiveness to the collective capacity and service challenges facing the industry has been very favorable, as our strategic customers want to ensure we are providing sustainable transportation solutions across all modes."
Werner believes that the impact of Hours of Service rule changes in July of 2013 negatively impacted miles per truck by 2-3%.
Werner's truckload segment tractor count in Q1 was flat with 2013 at about 7080 vehicles.
JB Hunt
Hunt said that in its truckload segment, rates from consistent shippers improved approximately 1% year-over-year, but spot market pricing was up more like 9%.
Growth in its intermodal segment slowed substantially, with revenues up just 4.9%, but weather was blamed.
Its dedicated business soared 20%, no doubt fueled by shipper growingly concerned about capacity.
A net additional 1,014 revenue producing trucks were added to the dedicated segment over the same period in 2013, primarily from new accounts, the company said.
Heartland
The company it "continues to be challenged by the impact of government hours-of-service regulations, including the thirty-four hour restart and a thirty minute break within the first eight hours of driving that were effective July 1, 2013."
Knight
Knight said its revenue per tractor increased 5.1%, year over year, as a result of a 4.9% improvement in revenue per loaded mile, a 4.2% increase in its length of haul, a 140 basis point improvement in its non-paid empty mile percentage, and a 1.3% decrease in miles per tractor.
It added that "We experienced this growth despite operating 2.2% fewer average tractors, 3,985 vs 4,076 in 2013.
Knight said that "the industry continues to be faced with multiple inflationary pressures, including rising driver pay, increased regulation, additional maintenance cost associated with the 2010 EPA emission engines, and rising equipment cost."
It added that driver development and training programs remain a primary focus area for the company's management team.
Its tractor fleet remains one of the most modern in the industry, with an average age of just 1.9 years.
Swift
Added 550 operational trucks over the course of the first quarter to its dedicated segment. It also expects to add approximately 150 additional trucks over the course of the second quarter of 2014, which will increase the average operational truck count by approximately 400 trucks from the first quarter to the second quarter of 2014.
Some of that is coming from the truckload segment, from which 150 tractors were transferred in Q1, with more to follow.
Swift estimates that the combined negative impact of the severe weather conditions on operating income was approximately $15 million in the first quarter.
Noted that "With the economy improving, our industry's driver market is becoming increasingly challenging."
Marten
Company said that "We are pleased to again be named to Forbes magazine's list of America's 100 Most Trustworthy Companies, making us one of only four companies to be named for the fourth time in the last five years."
Celadon
Celadon increased its average seated tractor count by 816, or 31%, to 3,440 in the March 2014 quarter compared to 2,624 in the March 2013 quarter.
This increase was a result acquisitions and then expanded recruiting efforts at terminal locations and having established a new driving school to find the drivers needed for the fleet expansion.
Any reaction to our Q1 2014 truckload segment review? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.
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