Werner Enterprises and Swift Transportation have announced that sharp fuel spikes in the aftermath of the recent hurricanes along the Gulf Coast will crimp earnings in the third quarter.
“Assuming diesel fuel prices remain at [Sept. 20] price levels for the remaining ten days of third quarter 2005, the negative impact of fuel expense on earnings for third quarter 2005 compared to third quarter 2004 is estimated to be $0.06 to $0.07 per share,” Werner said.
Werner, like many for-hire trucking companies, tracks its fuel surcharges with the Dept. of Energy’s weekly price index. On Sept. 19, DOE reported that diesel averaged $0.12 cheaper and Werner had scaled back its surcharge accordingly. “However, since diesel fuel prices rose $0.18 [on Sept. 20], Werner [paid] substantially fuel prices [that week] that are not being recovered in [that] week’s fuel surcharge rate.” Werner said, pointing out that the difference was $0.30 per gallon.
Conversely, if fuel prices fall below that of the DOE survey, trucking companies gain a premium off surcharges.
Swift Transportation announced its fuel surcharge program lags rising fuel prices and could not adequately recover the dramatic spikes in fuel cost the company experienced in this quarter. Swift estimates the increase in fuel costs for the quarter will have a negative impact of between $.04 and $.06 per share on its previous expectation of earnings.
“I think you’ll find there’s more companies that will be affected by the fuel spikes than less,” Satish Jindel, president of S.J. Consulting told FleetOwner. “On the LTL side, Yellow Roadway announced they expect a 5-cent a share negative impact because of Katrina. On the other hand, companies like CNF that own Con-Way said they won’t be impacted by fuel challenges after Hurricane Katrina.”
“[The degree to which a trucking company is impacted by fuel is] a function of having the discipline to pass along fuel prices in contracts with customers,” Jindel continued. “Some companies have a cap on the maximum amount of fuel surcharge they will pass through. If you have a huge presence in the states affected by the hurricanes you will be more impacted.”
Also a factor would be the contracts by which a trucking company procures fuel. Companies that managed to lock in prices before the hurricanes will not be as heavily impacted by the spikes, for example.
“But Louisiana, Mississippi and Alabama are not very dense freight states,” Jindel said. “In fact, some companies are maybe benefiting from the premium they could charge operating in such states. In those cases they would offset low tonnage with high yield. For example, Landstar, even if they’re affected partly by fuel, it won’t show in their earnings because they’re benefiting from added FEMA-related revenues.”