No profit in year-end freight peak

For-hire truck tonnage jumped 4.1% in December last year after rising 0.9% in November – helping close out 2007 on a positive note, with many carriers reporting an up-tick in revenues

For-hire truck tonnage jumped 4.1% in December last year after rising 0.9% in November – helping close out 2007 on a positive note, with many carriers reporting an up-tick in revenues for the fourth quarter.

However, economists caution that overall freight volume declines in 2006 and 2007 still indicate truckers won’t necessarily see an increase in business for 2008 – mirrored by continued earnings declines at major trucking companies.

“Both the month-to-month and year-over-year increases were very encouraging,” said Bob Costello, chief economist for the American Trucking Associations (ATA). “However, the supply chain has changed during the fall freight season, leading to better Novembers and Decembers than in the past, so we shouldn’t read too much into the recent data at this point.”

He noted that while the final two months of the year were surprisingly good given the current economic environment, financial crisis, credit crunch and weak housing market, the ATA’s tonnage index declined 1.4% in 2007, following a 1.7% drop in 2006. Costello still places the odds of a recession at 40%, and believes truck freight volumes will be volatile and lackluster in the first half of 2008.

High fuel costs are adding to the pressure on carriers’ bottom lines. Heartland Express said rising diesel prices negatively impacted its bottom line by approximately $10.5 million, or seven cents a share, in 2007. While revenues rose 4.1% in the fourth quarter to $152.8 million, and 3.5% to $591.9 million for all of 2007, net income fell by 15.4% to $16.6 million, and 12.6% to $76.2 million, compared to the same periods in 2006.

“A challenging freight environment characterized by the continued imbalance between freight demand and industry capacity constrained revenue volume,” said Cliff Beckham, president and CEO of USA Truck. “Much of [our] improved operational efficiency was offset by intense competition in the marketplace that drove our trucking revenue per loaded mile down 2.8%. Overall, base revenue per tractor per week improved, but not enough to overcome increased costs.”

While USA Truck’s base revenue rose 3.6% to $95.7 million in the fourth quarter, and increased 1.5% to $391.2 million for all of 2007, net income fell in both periods, compared to 2006. USA Truck posted a loss of $1.6 million in the fourth quarter and profits of only $120,000 for all of 2007.

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